The small firms body ISME is to launch a crowdfunding campaign to fund a legal challenge to the State pensions system on the grounds that it discriminates against private sector workers.

ISME hopes to raise €0.5m from PAYE workers, professional groups, trade associations, trade unions and small business owners for the legal action targeting the significant difference between pension provision for Government employees versus workers in the private sector.

The High Court action would be initiated later this year, and would support three plaintiffs in challenging what ISME describes as "tax discrimination against private sector workers".

ISME cites the last Public Service Pay Commission report, which found that while there was almost 100% pension coverage for Government employees, the overall figure for the private sector was just 40%.

"Workers in the private sector who aspire to a pension even close to that enjoyed by a public sector worker earning the same salary, would have to surrender more than a third of their salary to do so," says ISME.

"Even if they could afford to do so, our taxation rules constrain them from doing so. Our taxation system permits only third division pensions for the private sector."

ISME says private sector workers should not be penalised "for trying to save a pension pot of equivalent value to that which is provided to a public sector worker for little (or no) contribution".

The small business body also wants private sector workers permitted to save "what they feel is appropriate to give them a decent standard of living post-retirement".

It says private sector workers should be incentivised to save towards their pensions, and to "minimise the burden on society caused by the pension deficit".

ISME says the "innovative" crowdfunding initiative is intended to support the formation of a technical team "giving tax guidance, pensions expertise, actuarial assistance together with tax and constitutional law advice for the pension's equity challenge".

ISME is calling for private donations of €100, or whatever donors can afford, to support the challenge.

ISME's CEO Neil McDonnell said private sector workers were not treated in a "fair and balanced" way when trying to save for a pension, and should enjoy parity with public sector workers.

"It is ironic that those in the public service who declare tax relief on private pensions to be 'tax expenditures' are themselves the beneficiaries of an enormous transfer of wealth from private sector workers to the public sector," said Mr McDonnell.

"Tax relief on private sector pensions savings is tax deferred, not tax avoided. With the support of the SME community, we have a great opportunity to fix this and to ensure a fair pension system on behalf of private sector workers," he concluded.

ISME says that any surplus funds raised will go to Social Entrepreneurs, the Jack and Jill Children's Foundation and The Friends of the Royal Hospital Donnybrook.