Government still debating mechanics of cap on pension tax relief
'Significant changes' expected on pensions in budget, conference told
Minister for Social Protection Joan Burton addressing the Irish Association of Pension Funds IAPF Annual Benefits Conference 2013 in the National Convention Centre. Photograph: Alan Betson.
Pension policy in Ireland has been “very poorly cared for”, according to one member of the group charged with assessing policy options for the Government.
Patrick Burke, chairman of the Taxation Policy (Pensions) Group made his comments after confirming that “significant changes” were expected on pensions in the budget.
However, he told the Irish Association of Pension Funds that issues remain on how exactly the Government will cap tax relief on pensions delivering retirement incomes above €60,000.
Minister for Finance Michael Noonan has already confirmed the cap will come into force next year. But there are ongoing discussions about the practicalities of how it is done.
Mr Burke told the association’s benefits conference that a cap on pension income was chosen rather than standardising tax relief at the standard rate, or a mixed 30 per cent rate, as the latter option would affect 55,000 taxpayers earning more than €35,000.
The cap on pension income will affect about 27,000 people, only those with income in excess of €125,000, he told delegates.
Earlier, Minister for Social Protection Joan Burton outlined the Government’s record in improving the state of the economy and driving down unemployment, adding that Ireland’s “record of lifting people out of poverty is far, far better than almost any other country”.
Addressing figures showing an acceleration in the number of pension schemes being wound up, the Minister said that if the defined benefit or final salary pension “promise” could not be met, “painful and all as it is it has to be faced up to”. While it was “accepted” that some schemes would be wound up, she drew comfort from Pension Board figures showing 40 per cent of defined benefit schemes now meet the required minimum funding standard.
In a question and answer session, the Minister confirmed that the controversial four-year pension levy, which will take €1.9 billion out of pension savings, will end as expected next year. However, there was no clarity at the conference on whether any new levy or charge would be required to compensate victims of the collapse of the Waterford Crystal pension fund or other failed schemes.
She sidestepped questions on the failure of the Government to spend all the pension levy money on job creation as the Government had committed to at the outset. Rachael Ingle, chairwoman of the association, said that, while there might be some green shoots on the economic front, “we are not seeing the green shoots of recovery for pensions”.
“We still live in a country where there is a low retirement readiness and a profound shift of risk from the employer to the employee,” she said. Addressing the myriad issues facing pensions “needs some hard decision-making and leadership and I think that is sadly lacking at the moment,” Ms Ingle said.