<p>Pension levy &#39;will hit ordinary workers&#39;</p>

Wednesday 11 May 2011 14.54
<p>Pension levy &#39;will hit ordinary workers&#39;</p>

 

Ordinary workers will pay the price of the new government pension levy being brought in to fund a jobs initiative, according to the Irish Insurance Federation.

 

The state's plan to take almost €2bn from private sector funds will mean retirement funds being tapped for an average of €500 a year over the next four years.

Minister for social protection Joan Burton told RTE's News at One that it was "up to the pension industry to work out how and when to pass on the levy". 

But the IIF warned that the levy will hit ordinary workers, not high earners.

'Recent changes made sure that pensions are no longer a tax-shelter for higher earners, so this levy does not penalise those that are well off, but ordinary middle income earners,' IIF chief executive Mike Kemp said.

He said that the levy goes against the advances that have been made in recent years to encourage people to save for their retirement.

'We urge the Government to support the efforts of the million plus ordinary workers who have been saving for retirement instead of imposing a levy that will discourage pension saving,' he said.

He pointed out that there has been a well-recognised shortfall in pension savings and, he believes, given the established demographic trends, it is in the longer-term interest of the State itself, as well as of individual citizens, to encourage private occupational pension provision.

The IIF says it has written to the Minister for Finance to highlight what it sees as the disproportionate burden being placed on the industry by way of the levy, in addition to additional restrictions on tax-efficient pension savings already imposed in the last Budget and the proposal to reduce tax relief further as part of the National Recovery Plan (NRP).

Mr Kemp said that as part of the NRP the pensions industry has been asked to contribute almost €1 billion of the €15 billion savings to be raised.

'This places a huge strain on the pensions industry and its customers,' he said.

'We have been discussing alternative ways of raising funds with the Department of Finance and we urge the Government to look at the wider picture and consider the long-term policy implications before imposing unaffordable cumulative charges on the sector.'

Irish Life says workers need re-assurance

Gerry Hassett, chief executive of Irish Life (Retail), said that while the industry is conscious of the critical challenges facing the country, and the importance of job creation in particular, he is disappointed that ordinary workers trying to save for retirement are being targeted.

'We would urge the Minister to offer clarity around future policy on pension taxation and to reassure the million plus workers who are saving in pensions that he will continue to support them in their efforts to save for their retirement,' he said.

'Just a few years ago there was a broad consensus that we needed to plan now to avoid a pensions time bomb in this country. Unfortunately every policy announcement on pensions since that time has undermined confidence in retirement planning and has contributed to an escalating pensions problem,' he said.

He said that while the crisis in the public finances must be dealt with, it was important to avoid creating an even bigger fiscal crisis for the next generation in the process.

There was also criticism of the plan to impose the levy from the President of Irish Creamery Milk Suppliers (ICMSA), Jackie Cahill. He described it as just the latest evidence of 'an astonishing reluctance on the part of the Government to deal with the public and private sectors on anything like an equal footing.'

Mr Cahill said that the levy was nothing less than an unjust attack on private property and was, in addition, probably unconstitutional. The ICMSA President said the reaction of farmers and other self-employed individuals would change very quickly 'from open-mouthed astonishment to cold fury.'

Keywords: pensions, levy