The Government’s accumulated private pension levy proceeds are set to exceed €2 billion with the collection today of an estimated €700 million on foot of the increase in the charge this year.
Thanks to rising stock markets, a modest pre-budget boost to the public finances is expected when pension funds deliver their portion of the levy to the Revenue this morning.
A further €135 million yield is anticipated in 2015, although pension industry and business interests are lobbying for the elimination of the charge in next month’s Budget.
Minister for Finance Michael Noonan had projected a €675 million yield this year, but the return is now likely to come in ahead of that target. According to the Irish Association of Pension Funds, the aggregate payment may reach some €700 million.
Tops property tax
Such a return from the levy, introduced in May 2011 in the first year of the EU/IMF bailout, would come in well ahead of the €550 million expected this year from property tax.
While the property tax and, indeed, the new water charge have attracted considerably more public controversy than the pension levy, the 2014 collection today will bring net proceeds to some €2.18 billion in four years.
The Government received €463 million in 2011 and a further €483 million in 2012. The 2013 yield was €535 million.
Mr Noonan introduced the levy as part of the 2011 Jobs Initiative to compensate for the reduction of the hospitality sector VAT rate to 9 per cent.
The levy was set at 0.6 per cent on the market value of assets managed in pension funds and plans approved under Irish law. This includes occupational pensions, retirement annuity contracts and personal retirement saving accounts.
The 0.6 per cent levy was to apply for four years as cast originally, so it would ordinarily expire at the end this year.
In his budget speech last October, however, Mr Noonan increased the charge to 0.75 per cent in respect of 2014 and said further 0.15 per cent charge would be levied in 2015.
The Minister said then that his aim was to continue to help fund the Jobs Initiative and to “make provision for potential State liabilities which may emerge from pre-existing or future pension fund difficulties”.
Jerry Moriarty, chief of the Irish Association of Pension Funds, estimated a €700 million yield today on the basis of increased stock market valuations since an association survey, which put the capital value of Irish pension fund assets at €91.5 billion on December 31st, 2013.
“This is a significant contribution from retirement savings, at a time when those savings are not enough to provide most people with an adequate income in retirement,” he said.
Mr Moriarty went on to say that no details had been provided as to the nature or extent of the “potential State liabilities” cited last year by the Minister.
“In any case, it is completely inequitable to ask those with defined contribution retirement savings to make a contribution to State liabilities in defined benefit schemes,” he said.
“This levy is now more than the management fees paid by the majority of pension schemes we represent.”