Pensions schemes to accept €60,000 tax relief cap
Pensions schemes are ready to accept a move to cap tax relief on contributions that deliver income of more than €60,000 a year in retirement.
Characterising it as “the least worst option”, chief executive of the Irish Association of Pension Funds (IAPF) Jerry Moriarty said: “We would be hopeful that if they are going to do something, it will be something along those lines.”
The comments will be welcomed by Minister for Social Protection Joan Burton, who is seeking further savings on pensions to help her achieve targets set in the bailout agreement with the troika.
In an interview with The Irish Times, Mr Moriarty said the €60,000 pension cap was preferable to an alternative that would see the relief on pension contributions fall to the basic income tax rate of 20 per cent.
“The way we look at it, if you reduce the relief on offer to 20 per cent, there are around 555,000 contributing to pensions who are on the higher tax rate. That’s an immediate reduction in take-home pay and for a lot of those people, the way you mitigate that reduction is that you stop paying the pension contribution,” said Mr Moriarty. “That is not good in the long term.” About 27,000 people would be affected by the €60,000 cap – essentially those earning at or above €125,000 a year in the public or private sector. The savings from either option are similar, says the IAPF, which represents Irish occupational pension schemes.
“I think it is seen in the industry as the way to go,”Mr Moriarty said. “It is Government policy and when you look at the numbers of people affected and the equity issue, it almost seems like a no-brainer.”