LDFerguson
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Second being that as a result of the Euro Courts ruling regarding the Waterford Crystal DB scheme the Government needs to raise funds to cover this cost. So what does the Minster do, turn around and continue with a levy on not just private and DC scheme's but also on DB schemes thus making it even more difficult for other these schemes to meet the funding standard and pushing them ever deeper into insolvency.
Noonan's excuse got undermined afterwards, as far as I remember the pension industry had estimated how much having a cap on pensions would save, but the DoF decided they'd phase in the cap on public service pensions (such as Noonan's) so as a result the DoF savings figure was less than the pension industry's.First being that the pension industry misled him in how much the pension levy would raise. This I think is a lot of waffle as it would be very easy to find out how much pension assets are under management
This is probably the worst outcome from the levy, people altering their behaviour with pension savings. The last couple years since the levy has seen sustained pension fund gains.I stopped paying into my pension fund when the government first started playing with pensions.
Amazing how many people didnt actually thing that that pension grab was a huge issue.
I stopped paying into my pension fund when the government first started playing with pensions. A pension should be something you can use for retirement planning. If they keep stealing money from pensions and playing with pensions its impossible to plan using them.
Yes, once the pension is drawn down, income tax is applied, AFTER taking the tax free lump sum, and AFTER allowing for the additional tax credit for older people, and AFTER allowing for the tax free growth.RainyDay;
I hear you, but once pension is drawn down ,Income Tax is applied , so its a kind of deferred tax take that encourages people to provide for old age.
Amazing how many people didnt actually thing that that pension grab was a huge issue.
I stopped paying into my pension fund when the government first started playing with pensions. A pension should be something you can use for retirement planning. If they keep stealing money from pensions and playing with pensions its impossible to plan using them.
What's incredibly stupid about Noonan's deceit and U-turn on the levy is that he's taking money from people's private sector pension funds but at the same time has to be aware that the State Pension will not be able to be continued for too many more years at its current levels due to the changing demographics of the country.
So how do you reckon people will be able to live in retirement then Minister Noonan? Oh sorry - I forget that Noonan will have retired on a fat ministerial pension long before any of this comes home to roost for everyone else.
I would ask everyone to read Conans post . It is simply a very good and informative post.
I would ask everyone to read Conans post . It is simply a very good and informative post.
I know it's tempting when faced with a Govt policy that I disagree with or don't like or costs me money to assume that the folks involved don't get it. This generally isn't true. Whatever about Ministers, the officials and advisors involved generally get it. They generally know their areas very very well.The difficulty with Pensions is that they are a long term investment whereas politicians have a purely short term perspective - to the next election. Whilst this current Govt have done much to stabilise the economy after the mess they inherited from FF, they have shown little understanding of the long term nature of pension funding.
The ‘largely a tax deferral’ line is spin, usually coming from those who make a living from pension commissions. Yes, you correct to point out the USC percentages, but that only tells you half the story. It ignores the fact that by spreading income over the additional pension years, one pays considerably less tax due to tax credits. It ignores the fact that the additional tax credit for older people considerably reduces the tax take. It ignores the effect of the tax free lump sum. It ignores the effect of the tax-free growth. It ignores all these options that aren’t available to those who can’t or don’t invest in pensions.- Pension contributions are largely a tax deferral exercise. Yes one gets tax relief on contributions invested, but one pays income tax + USC on income drawn down in retirement. So you might get 41% tax relief on the way in but currently might pay 48% tax on the way out.
Perhaps you missed the coverage of the Pensions Levy imposed on public servants as one of the first responses to the economic collapse. Since early 2009, public and civil servants have paid between 5%-10.5% of gross income above €15k as a pensions levy, including some staff who don’t get any pension benefit at all. This 10%-ish deduction doesn’t quite meet my definition of escaping scott-free.- Private sector pensions involve funding in advance to provide the ultimate benefits. Such arrangements are subject to the vagaries of investment markets and increasingly to Govt regulation ( which in the case of DB schemes seems to be making such funding more difficult). Most Public Sector schemes are unfunded or effectively underwritten by the Govt (e.g. recent changes to Universities Superannuation Schemes). So when a Pension Levy was introduced it largely only impacted private sector funded schemes. Public Sector schemes escaped scott free.
The levy is no more a ‘raid’ than your income tax is a ‘raid’ on your salary, or the VAT on your supermarket bill is a ‘raid’. Really, you don’t do yourself any favours with the melodramatic language. If you want to decide that ALL taxes are ‘raids’, then so be it, but I don’t think it really helps the discussion.- Apart from raiding private pension funds, many of which are struggling to meet funding standards, the other impact is that individuals are less likely to invest in private pension structures if they feel that the Govt cannot resist the temptation to continually raid their private pension fund.
There does indeed seem to be an equity issue here. It is worth pointing out that the number of politicians or civil servants who retire on pensions of €115k pa is tiny, probably something like 20-ish people each year, at an uneducated guess. I’m not condoning the inequity, just putting it in context.- The Ministers excuse for continuing with the 0.15% levy was entirely deceitful. The pensions industry had worked out the potential tax saving to the Govt if they both reduced the pension fund cap to €2m AND increased the multiplier for DB pensions (because the original 20:1 multiplier grossly underestimated the real value of DB pensions). However in the Dec Budget whilst the Minister reduced the cap to €2m immediately (and therefore impacted DC immediately) the increase in the multiplier would only apply to DB benefits earned after Jan 2014. So guess what, the higher valuation factors would have minimal impact on current senior civil servants and current senior politicians.
- The effect of the above, not well understood by most, is that a member retiring from a DC scheme in 2014 is immediately limited to the €2m cap which in reality would buy an annuity of about €65,000 p.a. whereas a senior civil servant retiring in 2014 could have a pension of €115,000 p.a. without exceeding the notional fund cap. Not exactly equitable.
- So private sector DC members are hit with a pension levy and immediately subject to a pension cap of €65,000 whereas senior civil servants are not subject to any equivalent pension levy and can earn a pension of up to €115,000 without exceeding the pension cap.
Public sector employees have by no means escaped scott free, and have paid more than their fair share in the area for years before the levy on private schemes was introduced. Yes, the Govt should be encouraging people to make provisions, but there is a difference between ‘encouraging’ and ‘subsidising’. Certainly, the Govt was right to introduce the caps on tax relief, and any inequity between DB and DC schemes should be addressed by bringing the DB cap down.With increasing longevity, Govt policy should be on encouraging people to make provision for their old age rather than only relying on the State Pension (which itself is coming under financial pressure because of longevity). The problem is that there is no long term thinking in Govt when it comes to pensions. Unfortunately the Minister cannot pass up the opportunity to take a slice of private savings whilst similar public sector employees (whose pension benefits are largely funded by taxpayers generally) escape scott free.
Don't forget most Public Sector workers also have AVC's so they were also subjected to this levy on any private income.
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