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Taxation and multimillion pension pots

A little more self-awareness

Letters to the Editor. Illustration: Paul Scott
The Irish Times - Letters to the Editor.

Sir, – The contributory old age pension in Ireland is worth some €14,500 per annum, which must be considered by the State as sufficient to live on. Now we have groups complaining about the effects of taxation on their pension pots in excess of €2 million (“Hundreds of senior civil servants have pensions valued at €2 million or more, submissions to review group say”, News, June 24th).

These pension pots will generate a pension of some €85,106 per annum in addition to a lump sum payout of €255,139. The complainants are the usual suspects: senior civil servants, doctors, and judges.

A little more self-awareness, rather than self-pity, with these people would not go amiss. – Yours, etc,




Co Kildare.

Sir, – Martin Wall reports on the concern of senior civil servants that recent public service pay awards have “inadvertently pushed them into the net of facing significant tax on retirement”. I think “inadvertently” is good.

The offensive legislation was introduced and amended on the advice of and with the assistance of senior civil servants to apply penal taxation to so-called gold-plated pensions. On its introduction in 2005 the capital value of a pension pot beyond which the tax would kick in (the standard fund threshold or SFT) was set at €5 million and it was intended that it would be indexed at regular intervals which it was in 2007 and 2008.

The financial crisis prompted a reduction in the SFT to €2.3 million in 2010 and it was reduced further to €2 million in 2014. It has not been adjusted since.

Various bodies in the private sector have for years been calling for the adjustment of the SFT for inflation generally or for inflation in earnings. But it was only when it was realised that the penal taxation would affect public servants – judges, senior gardaí and now senior civil servants generally – that these calls for reform got some traction and a review group was established.

This is where the “inadvertently” comes in. In the minds of senior public and civil servants – including those who assisted in the introduction of the legislation – it was never intended that penal taxation on larger pension pots should affect them. And now that it does or might, the SFT must be increased, presumably to a level at which it will no longer involve a cost for public-sector workers.

Of course all tax thresholds should be adjusted in line with inflation to preserve their real value. But we should not have to wait for submissions from affected public servants for that to happen. – Yours, etc,



Dublin 6.