15/07/2011
By Matt Ritchie
Research carried out by IFG has shown that many pension professionals believe Ireland’s incoming pension levy will result in widespread cuts in pension payments.
The proposed levy is to be put in place to pay for the government’s ‘Jobs Initiative’, a package of measures designed to assist in employment generation, provide opportunities for those who have lost their jobs, and foster confidence in the economy.
In documents outlining the measures, the Department of Finance said the levy will be applied at a rate of 0.6% to the capital value of assets in Irish pension funds. It will apply for a period of four years from this year, and is intended to raise about €470 million per annum.
A survey carried out among defined benefit pension scheme trustees, company directors and other key pension decision-makers at a recent IFG Corporate Pensions conference in Dublin revealed 6 in 10 believed that more than 40% of DB schemes will face cuts in payments as a result of the pension levy.
Furthermore, 60 per cent of pension decision makers said the levy is at odds with minimum funding requirements imposed by Pensions Board.
Director of IFG Corporate Pensions Fionán O’Sullivan said the survey showed nearly half of the people surveyed said that the levy has forced them to rethink the funding strategy of their schemes.
“For DB trustees and members, the levy introduces the spectre of reductions in benefits; including for the first time reductions to pensions in payment to employees who have already retired. Trustees have a number of key decisions to take in the coming weeks in this regard and we may yet see a public outcry similar to that over the proposed withdrawal of medical cards from pensioners.”
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