Irish private pensions ‘need support’ –
IAPF
25 March 2009
Written by Sophie Baker
Irish private pension provision will be destroyed if the
Irish Government goes ahead with a reduction in tax relief, says the Irish
Association of Pension Funds (IAPF).
Next month’s supplementary Budget will outline the proposals, and
the IAPF has released a briefing paper in advance of this. It says that
the reduction in relief on pension contributions to the standard rate
would attack the 800,000 ordinary members of occupational pension schemes,
and not the “super wealthy”.
The €3bn that has been referred to as the estimated “cost”
to the State of providing pensions relief is, the IAPF says, out of date,
and includes both double counting and invalid assumptions. According to
the non-commercial organisation, whose aim is to promote financial security
for people in retirement, believes that in reality, the maximum the Government
could raise by adjusting the tax relief system is in fact around €300million.
The briefing paper also highlights the fact that the Irish pension system
is one of tax deferral, and that in 2006 the State collected €320million
in tax from pensions in payment.
“Member of defined contribution schemes are already reeling from
pension fund losses of over 30 per cent in the last year,” said
IAPF chairman Patrick Burke. “Capping income tax relief to employees
at the standard rate would largely destroy any incentive to save for retirement.
Research shows that those most affected would not be the wealthy but lower
to middle income workers on salaries from €40,000.”
The IAPF added that the reduction of pension relief to the standard rate
would in turn increase the cost of the pensions levy to public sector
workers by an average of 35 per cent.
“The Government has already moved to restrict pensions benefits
to the wealthy in the last Budget by reducing the earnings cap on relief
to €150,000 from €275,239. Pensions provision in Ireland needs
support – not action that could destroy it completely,” he
concluded.
