Concerns over impact for pensions

Wednesday 24 November 2010 21.07
Pensions - No confirmation of when retirement lump sums above €200,000 will be taxed
Pensions - No confirmation of when retirement lump sums above €200,000 will be taxed

The four-year plan will have huge implications for pensions in both the public and private sectors.

Around half the workforce have no pension provision other than the basic Sate pension, despite Government incentives to encourage investment in retirement plans.

Tax relief on pension contributions - currently worth up to 49% - will gradually be be lowered to a standard rate of 20% by 2014.

The annual cap for pension contributions will be reduced from €150,000 to €115,000.

There is no confirmation of when the Government will implement recommendations to tax retirement lump sums above €200,000.

But it hopes to bring in almost €1m from these measures.

For the first time, existing pensioners will have their pensions cut - by an average of 4% - to partly mirror wage cuts for State employees.

While pension income below €12,000 will be unchanged, income above €60,000 face a cut of 12%.

The grace period for retiring on the pre-pay cut salary has been extended to February 2012.

There are concerns that the four-year plan will discourage people from investing in pensions.

If that does happen, it could mean a higher number of citizens becoming totally dependent on the State in the future.