Disagree with the new pension levy

S

Skybox

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Is this going to be an annual tax or a once off?

My husband's pension is substantial enough - he has long years of service and put our savings into AVCs. He thinks we are looking at another substantial bill :(

Just how much more can they take off people? What is the point of having a pension any more?
 
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Just how much more can they take off people?
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How much have you got in your pension fund?

I suppose the 0.5% rate will increase as people stop contributing.
 
It could be the lesser of two evils though. Looks like a compromise for not reducing tax relief down to 20% for all, which would have made a lot of people stop contributing all together.

If you have a fund of €100,000, then you'll be paying €50 in tax, not a huge amount in the whole scheme of things
 
boaber said:
It could be the lesser of two evils though. Looks like a compromise for not reducing tax relief down to 20% for all, which would have made a lot of people stop contributing all together.

If you have a fund of €100,000, then you'll be paying €50 in tax, not a huge amount in the whole scheme of things
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€100,000 @ 0.5% is €500
 
It is sizeable.

Say you put in €5k at the age of 35, they'll have taken €700 of this or 14% by the time you retire at 65.

The pension provider might charge you 1% p.a.

Combining both of these, 37% of your €5k would be taken by age 65. You'd be relying on some very decent out performance in your funds to beat inflation. It might still be worthwhile if you are getting 41% relief on the way in and paying zero tax in retirement, but it starts to make less or no sense if you get less than 41% relief on contributions or if you end up paying even the standard rate of tax in retirement.

You'd actually need some fairly sophisticated calculations to work out the best course of action at any point in time but for me this shifts the balance towards non-pensions savings/paying off mortgage/paying off debts/etc when you are younger and then maxing out pensions contributions in the last 20 years rather than paying a steady amount in over 30 or 35 years.
 
The really interesting piece is that legislation will permit existing schemes to reduce pensions in order to pay for this. The required reduction is of course exactly the same as the levy i.e. 0.5% to 0.6%. So people in private pensions can expect their pensions to reduce by this amount per annum so long as the levy is in force and if the levy is ever stopped the pension will stay at the reduced level.

Okay so now we see that the crisis has hit the following sections of society:

People who lost their jobs
People in the private sector who have seen their salaries at best stagnate and their bonuses vanish
Avtive public servants who have seen heavy cuts in their remuneration
Social welfare recipients
and now
Private sector pensioners

The following groups remain unscathed:

Public sector pensioners
Old age pensioners
Semis state workers and pensioners
 
I have a good well paid job and a good standard of living.
But I was frugal, I put as much as I possibly could aside into my pension for fear that the state wouldn't be able to provide for me when I reach retirement. I could have taken the money invested in pension and bought bulgarian property with it but I didnt.

I am now going to be screwed over for the next 4 years and have close to 3K taken out of my pension fund as a punishment for being fiscally cautious when every other lunatic was taking 4 holidays per year and buying up half of eastern europe.

I'm married to a public sector worker and we've had our incomes filleted over the last 2 years.

This is too much. Anyone know of anyway to remove funds from a DC scheme that I've contributed to for the last 10 years? Or do they have me by the short and curlies as I suspect they do.
 
Eeyore said:
€100,000 @ 0.5% is €500
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If you are like many older middle class people nearing retirement, you may have a fund of well over €1 million. Suddenly 0.5% seems like a lot. (0.5% of €1 million is €5,000 - If that is to be paid every year for 4 years :mad: now you see how much of an impact it could have on people's pension fund.)

I get the impression from today's news that this 'tax' will be taken from the pension fund, rather than asking people to cough up themselves - is that correct??

My husband won't be entitled to the state pension so he thought he was being prudent by putting as much of our savings in to his retirement fund - he could live to be 80 or 90.

I don't believe this 'levy' will only be in place for 4 years. It could become like the old 'health' levy that is now part of the USC. It is, in effect, a confiscation of our retirement funds.
Talk about moving the goalposts - this is changing the entire game!
 
Conan said:
Presumably the proposed Levy will apply to funded semi-state schemes (such as ESB etc). It seems that unfunded schemes escape the Levy, mainly -but not exclusively- civil servants. It might be argued that working Civil Servants have made a contribution (the increase in their pension contribution - though that is arguable) but the group that seems to escape entirely is retired civil servants and retired politicians whose pensions are not paid by annuity but rather out of the public purse.
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It's not arguable. Working PUBLIC servants have had pay cuts and a Pension Levy. Retired Public Servants have had their pensions cut by 6%to 9%.
 
It's a disgraceful suggestion. Why I should be taxed to pay for some pie in the sky job creation scheme just because I have a pension when people who dont have a pension or work in public sector don't have to pay. Why not impose the levy on savings accounts and other investments. Why pick on private pensions? I agree with the poster who says it is probably no longer advisable to pay into a pension until later in life.
 
I agree that it is a disgraceful idea, which if implemented will undermine the entire rationale behind saving for retirement.
 
Why not impose the levy on savings accounts and other investments.
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That's coming.

These are the last actions of a failed state. Instead of letting the banks fail and deposits get wiped out, savings, pensions and investments are raided by means of 'taxes'.

As soon as I get my wages, I try to move it out of the Irish government's grasp as soon as possible. Pension funds are easy pickings, and 0.5% is just the start.
 
Duke of Marmalade said:
The following groups remain unscathed:

Public sector pensioners
Old age pensioners
Semis state workers and pensioners
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You seem to have a different definition of 'unscathed' to most people. Have you heard of the income levy? Have you heard of the across the board reduction in public sector salaries, affecting staff and pensions by 6%-9%?
 
My first concern is how much my pension administrators will charge me for paying this tax. They charge me plenty for doing absolutely nothing other than mirroring the markets. This is not a skill worth paying for in my book.

In my view, the tax relief for pension contributions is a massive subsidy to an inefficient, incompetent, rent-seeking leech of an industry.

I do not mind paying more tax out of my pension if that is what is needed. However, I would be much happier if I were being forced to buy into a fund dedicated to funding Irish business start-ups, and I could sell my share on to somebody else. That way the money would hopefully create jobs and would be applied on the basis of commercial criteria, meaning the jobs would be more likely to be sustainable.
 
I do not mind paying more tax out of my pension if that is what is needed. However, I would be much happier if I were being forced to buy into a fund dedicated to funding Irish business start-ups, and I could sell my share on to somebody else. That way the money would hopefully create jobs and would be applied on the basis of commercial criteria, meaning the jobs would be more likely to be sustainable.
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The best way to help Irish business start-ups would be to reduce the amount of tax they pay. There should be incentives to start up businesses. At the moment, there are huge disincentives. How about removing these first? Increasing the tax burden for pension holders will just reduce the number of pensions. It is also another reason for leaving Ireland entirely.

As an SME owner, I do not believe that people should be forced to invest in companies like mine.

No doubt this fund for start-ups will be riddled with expensive, time consuming red tape, and will need plenty of people to administer it. I hate it.
 
Sunny said:
How will it work on DB schemes? Easy to impose on a DC scheme because the value of the fund is clear. That's not the case with DB schemes many of which have basically a minus value.
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I think you are confusing deficit/surplus with assets.

Plenty of DB Schemes have liabilities in excess of their assets - but they all have assets, and substantial ones.

This tax is a disgrace, is there any guarantee they will still not implement the reduction in tax relief over the next few years in addition?
 
Sunny said:
The value of a DB scheme isn't simply the assets in the fund as of today though so is this a tax on assets or values?
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Sunny, not sure what point you are making here. I know old style actuarial valuations might have valued DB assets at something different from their market values but I presume the levy will be on the market value of the assets which is just as tangible and observable as in a DC scheme.

I agree with the general negativity of the sentiment in this thread but let us remind ourselves where this originated. The 4 year plan wanted €700M a year from the pensions industry. The original proposal was to get this by reducing tax relief on contributions, which would have killed the pensions industry. The industry naturally lobbied for the levy on the grounds that it would be the lesser evil to hit those who have already been sold pension plans than to kill new business.

I thought it was a doomed attempt because of the parlous state of DB schemes but that has been solved by allowing DB schemes to pass on the charge by a reduction in pensions.

This is a huge break with tradition, needing legislation. It would be like the government applying a levy on company's payrolls and permitting companies to reduce the pay of their staff irrespective of any contractual arrangements.
 
Skybox said:
If you are like many older middle class people nearing retirement, you may have a fund of well over €1 million.
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I'm not sure this is still the case given the collapse of pension fund values and if it is then they are not the worst affected.

However agree that this would be an awful measure if enforced and would really question why people in the private sector should bother to try and fund their retirement. Not sure if this is even legal!
 
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