Insurance industry opposes single rate of tax relief
THE INTRODUCTION of a single 33 per cent rate for tax relief on private pensions would disincentivise private pension provision, the Irish Insurance Federation (IIF) has claimed.
The issue of tax relief on pensions is expected to be addressed in next month’s budget. Both the Commission on Taxation report and the Programme for Government document produced in October propose the introduction of a standardised rate of tax, while an ESRI report published on Tuesday found that a single rate of tax could save the exchequer €500 million-€1 billion.
In its pre-budget submission, the IIF said a move away from marginal rate relief would lead to a reduction in the amount individuals contribute to their retirement fund. “We already have a significant gap between actual and target funding for pensions in Ireland and, while investor confidence is at a low point, markets are recovering and fund values will rise again. Any pension reforms should encourage people to make financial provision for retirement, not deter them.”
The IIF, which is the representative body for insurance companies, also claimed yesterday that 2,000 jobs in the life and pensions industry are under threat because of the 1 per cent life assurance levy introduced by the Minister for Finance earlier this year in the Finance Act.
Separately, pension and investment firm Standard Life said yesterday that the proposal to reduce pension tax relief to 33 per cent would be a “killer blow” to thousands of savers.
Pointing out that marginal rate savers will lose one-third of the value of current reliefs, the company said the proposed changes to the tax rate would result in “the worst of both worlds”.
“Savings from higher-rate savers will drop further or stop completely, while there will be no increase in savings from standard rate taxpayers who view the extra tax relief as an empty gesture from the Government.”