Pension Fund Levy Update & Commentary
What is the pension fund levy?
As part of the measures announced by the Government to promote job creation, a levy has been introduced on pension funds. A 0.6% levy is to be charged on all capital value assets under management of funded pension schemes and personal pension plans established in Ireland. The levy is temporary, and will be in force until 2014, raising an estimated €470m annually.
It has been clearly stated that holders of Approved Retirement Funds will not be subject to the levy.
How will the levy work?
The levy will apply based on the market value of assets as at 1st January 2011, however, there is little specific detail from the Department of Finance on the practicalities of the proposal. When such detail emerges we will issue a circular outlining the implications and implementation of the levy.
What is the Friends First view on the levy?
Friends First have prepared the following statement in response to the levy:
Statement by Eunan O’Carroll, Director Sales & Marketing, Friends First :
Whilst recognising the urgent need for the Government to implement a jobs initiative, it is regrettable that this has resulted in a levy on those trying to save for their retirement. This austerity measure will certainly dampen whatever enthusiasm the ordinary worker, taking a prudent approach to funding for their future, had. And, in turn, will create it’s own time bomb, given our demographics.
Over the past few years, Government has pursued a policy of encouraging private pension funding, a strategy which has now been eroded by the introduction of a levy which penalises those ordinary workers This, combined with the removal of PRSI relief and proposals to reduce tax relief, will leave those legitimately saving for their retirement contributing a disproportionate amount to kick start the economy.
We would welcome immediate clarity in relation to the strategy and policy on pension funding, and in particular confirmation that the proposed further erosion of tax incentives for ordinary workers retirement savings will now be shelved. This must be done in order to re-build the now dented confidence and uncertainty that ordinary workers have in relation to retirement funding.
