Irish warning over UK cut

THE abolition of tax credits on dividends for pension schemes in the British budget, could cost Irish employers up to Pounds 400 million, according to Watson Wyatt Partners, the Dublin actuary firm.

Watson Wyatt has noted that Irish pension funds are not immune.shares over future years and a capital contribution will be needed to maintain current funding levels.

However, a spokesman told The Irish Times that the Pounds 400 million is based on the average of 10 per cent of Irish pension fund assets that are invested in British shares and that Pounds 400 million is a maximum figure. Also, any under-funding would have to be made up over the average life - over 20 years - of a pension. Reducing corporate tax rates would help to alleviate the problem. Watson Wyatt stressed that the minimum funding standard set under the Pensions act 1990 may be breached if market values were to fall in response to the change under the British budget. And contribution levels of Irish pension funds may have to increase as a result of the loss of investment earnings. Discretionary benefits, including the payment of post retirement pension increases might have to be reviewed. And Irish employers with British employees in separately constituted British pension schemes are directly affected.