Small business lobby Isme and Brokers Ireland, which represents financial advisers, have called on the Government to increase financial support for private pensions.
The groups have written to Ministers outlining measures that, it says, would remove “pensions discrimination against the self-employed and private sector workers”.
"The gold-plated pensions available to our politicians and our public servants are simply not affordable for workers in the private sector," Isme said as they presented what they call a pensions "white paper", drawn up in association with Brokers Ireland, to Minister for Finance Paschal Donohoe, and Minister for Public Expenditure and Reform Michael McGrath.
It accused the Revenue Commissioners of “trying to devise ways of further reducing the ability of private sector workers to finance a pension they can afford to live on after they retire” even as political and public service pensions are indexed upwards annually with incremental pay as well as regular pay increases.
Isme says the nature of public service pensions means that a private sector worker, who wants to save for a pension as good as a public servant earning the same salary, would have to save at least half of their earnings throughout their working life. It adds that Revenue rules do not allow contributions at that level.
The report proposes four measures to help “level up” private pension entitlement with what is available to public servants.
These include the retention of tax relief at the marginal, or higher, income tax rate for pension contributions and retrospective indexation of the €115,000 ceiling on income against which tax-efficient pension contributions can be made. This ceiling, it argues, is particularly unfair for the self-employed whose earnings are variable.
The report asks for parity with the public sector in clawing back tax on oversized pension funds. As of now, for the private sector, this is taken as a lump sum on retirement. In the public sector, it is deducted from pension payments over 20 years, interest free and forgiven entirely if someone dies before the end of that period.
Finally, it is calling for more transparency on the true cost of public sector pensions, with departments being required to break out the cost of paying pensions to their former staff. Currently, it says, this happens only at the Department of Defence.
“The last actuarial assessment of public service pensions estimated them to be in deficit by almost €150 billion,” Isme says. “This shortfall will have to be paid by private sector workers who have no hope of ever being able to save for a pension as large as that of their public sector colleagues. This is immoral and unjustifiable.”
The group, which represents small business owners, says the cost of initiating the measures it proposes in Budget 2022 would be €50 million.