GOVERNMENT PLANS to introduce a pensions levy will mean lower benefits for members and a cut in income for retired private sector workers, employer group Ibec told Minister for Social Protection Joan Burton yesterday.
At a meeting with the Minister, Ibec disclosed results of a survey of its members showing that 46 per cent of respondents expect the introduction of the levy will result in a reduction of benefits for members.
Almost three in 10 said retired workers in receipt of pensions from defined benefit schemes would likely see a cut in income of as much as €1,000 in each €10,000 gross income they receive.
The Government has recently published legislation that provides for a levy of 0.6 per cent of the value of occupational pension funds each year for the next four years. The measure is expected to raise €470 million per year or almost €1.9 billion in total and is a cornerstone to the funding of the Government’s jobs programme.
As many as 23 per cent of respondents said the move was likely to lead to the wind-up of defined benefit (or final salary) schemes, with many more (50 per cent) anticipating difficulties in negotiations with staff.
Figures published yesterday show that in the first five months of 2011 the average Irish-managed pension fund has grown by just 0.6 per cent – the same amount the Government intends to levy.
The same figures show negative returns over the most recent three and five-year terms and gains of just 1 per cent per annum over the past decade, well below the prevailing average annual inflation rate of 2.3 per cent over the period.
Separately, the Office of the Revenue Commissioners disclosed yesterday that just 864 people have applied for a personal pension threshold. The threshold applies to people whose pension funds currently exceed the €2.3 million threshold being introduced by the Government.
Anyone with a fund worth more than this last December – and who does not register with the Revenue by close of business next Tuesday – faces a significant tax bill upon retirement.
