Gerry Canning
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Am with you Sunny.
What Noonan is now saying about the Pensions Levy: 2014
- Thread starter LDFerguson
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I have been on trade missions with Enterprise Ireland at which government ministers give speeches and make announcements. Over the last 3 years the company I work for has created 24 jobs. I can say without a doubt that without government actions that figure would have been considerably higher. Increases in income tax, the removal of the PRSI ceiling, levies, increases in rates and general anti-employment measures taken by this government have made it much harder to find and retain key skilled staff. Without those key staff the downstream jobs can’t be created. The double taxation of pensions is just one more thing that makes it harder to find and retain people and put inflationary pressure on wages in general. This is an anti-employment, anti-employer and anti-success government. I didn’t expect anything better from a small-minded begrudging party like Labour but I am disappointed with Fine Gael.
Pension contributions don’t get tax relief, the tax is deferred. Attacking people who are trying to make provision for their own future is stupid and petty and motivated by nothing more than misplaced jealousy by people who’s pensions are funded, to a large extent, by the state.
Honestly, I really know very little about wealth taxes across Europe, other than the fact that they exist in some countries, and the roof doesn't appear to have fallen in as a result. There is a big difference between a Government 'encouraging' people to provide for their future and a Government subsidising people to provide for their future through tax relief.
What we seem to see here is a furious outrage at a modest clawback on existing assets - an asset tax, based on assets that were built substantially on tax relief.
No-one is forced to put money into a pension (except civil/public servants, but that's another discussion). For anyone who doesn't like the conditions associated with pensions, they are welcome to use other methods to provide for their future.
Fair comment Purple. However, while I am condoning some of the actions taken by the current Government, I would see the majority of them as being reasonable if compared with the likely impact a Sin Fein coalation would want to impose.
Absolutely the imposition of a quasi Wealth Tax on pension funds is counter productive, but these funds are to an extent regarding as easy targets for raising funds. There is certainly a narrow minded view that private pensions are unearned wealth and a burden on the taxpayer, where realistically they are the exact opposite. Putting in a disincentive to those who wish to save fro their retirement makes no sense economically, but it helps to placate the masses and gives Labour some crumbs to placate their supporters.
Absolutely the imposition of a quasi Wealth Tax on pension funds is counter productive, but these funds are to an extent regarding as easy targets for raising funds. There is certainly a narrow minded view that private pensions are unearned wealth and a burden on the taxpayer, where realistically they are the exact opposite. Putting in a disincentive to those who wish to save fro their retirement makes no sense economically, but it helps to placate the masses and gives Labour some crumbs to placate their supporters.
I agree with all of that.
LDFerguson
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People on lower incomes may well get tax relief - if you're earning more than €32,800 per year and are therefore on the highest rate of Income Tax, you can claim tax relief at 41% on a pension contribution but if you're earning, say €40,000 per year you are unlikely to be able to amass a pension fund that would have you taxed at 41% in retirement. You'll have your tax-free lump sum and your pension will probably be taxed at 20% or not at all.
Higher earners who have the capacity to amass a pension fund that will still be taxed at 41% in retirement don't get tax relief, except on the tax-free lump sum element and tax-free growth of funds.
So any changes to the current system of pension tax relief would impact lower earners far more than higher earners. RainyDay seems to be in favour of such a change.
Rainy Day, your arguement is not based on any detailed knowledge or differentiation between Wealth tax and Income Tax. You may or may not be well versed on the differentiation and that tax relief on pension inputs is a deferral rather than a waiver of taxes payable. Pension assets are not Wealth in the general concept of the meaning. They are income generators for, in many cases averagely paid individuals who wish to put aside soem of their current earning to support their old age. Subsequent income is fully taxable.
I'm not sure that I fully understand Liam, is there any chance you could spell it out. I guess there are a few options in relation to tax relief;
1) Leave as is, with the cap in place
2) Restrict it to 'standard rate' tax relief, as has been done for medical expenses and health insurance
3) Eliminate it
Are you saying that both 2 and 3 would impact people at the lower end of the upper tax rate most?
I wouldn't claim to be 'well-versed' on any tax matters, though the basic concepts of wealth tax and income tax are fairly straightforward.
Yes, I've heard the 'only a deferral' argument again and again, usually coming most strongly from the pensions industry who seem to be absolutely desperate to hang onto a tax relief that they keep saying has little impact. This paradox is hard to get my head around.
It doesn't really matter what you call your pension fund - you can call it wealth or an income generator or call it Fred if you like. It is a pot of money. If you have a big pot, you pay a lump of tax. If you have a modest pot, you pay a very modest piece of tax. If you have no pot, you don't pay this particular tax.
And if you're a public sector worker, you have a notional pot that is not valued so not taxed - even if it is worth over €1M. And even if your pot was built up free-free or 'merely' tax-free.
As it happens, I've spend considerably more time in private sector than public, so my pension assets would be split across both,
But it's not really all about me, is it?
LDFerguson
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Yes they would. The people who benefit most from the current regime are those who are on 41% tax now but will be on 20% or zero tax in retirement. So this is the group that would have most to lose by a move to 2) or 3). Typically people earning mid-€30,000 / €40,000 per year would be on 41% while working but would not be able to accumulate a fund that would be taxed at 41% in retirement. So this group would be affected most by 2) or 3) above.
I certainly hope not.
But apologies, I meant 'you' as in 'one' so if you (actually you this time...) prefer it in the queen's English, And if one is a public sector worker, one has a notional pot that is not valued so not taxed - even if it is worth over €1M. And even if one's pot was built up free-free or 'merely' tax-free.
This isn't about anyone or the public sector. It's about the Government applying a levy on pension funds for no other reason that they can. They didn't touch the tax relief because they knew that this would damage pension coverage. They figured that nobody would really miss a tiny little levy and they were right. People don't understand pensions and don't understand the impact that this levy as well as management charges can have on a 30-40 year investment. It was a sly move that took advantage of people's lack of knowledge. When the pension companies and financial advisors all complained, they got accused of having vested interests. Of course they had but that doesn't mean they weren't right. The levy is due to take in over €500m this year. And done without any real protest compared to property tax or water charges. Mad.
LDFerguson
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Agreed. Which is why I started this thread. Noonan has said that the levy will be removed after 2015. I want a many people as possible to see his words (the first post). I don't trust him to keep his word as he didn't keep it the last time around. This is my little protest - a pre-emptive strike.
I wouldn't argue with much of that, but really, there wasn't much protest over the property tax or the water charges either. We're not the Greeks or the French. We don't really do protest here.
Steven Barrett
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You post a 60 page document as counter to my post but you don't know what it contains? I think I will save myself the bother.
In relation to your post on being able to promote pensions on its own merits, it can be difficult to do when the government can change how they work all the time. There has been 15 pieces of legislation passed in the last 24 years in relation to pensions, making them more difficult to understand.
But you are right in one regard, it doesn't matter what people use to save for their retirement, as long as they have something. The problem is, most people don't have anything.
Steven
www.bluewaterfp.ie
Liam, do you not think you are being a bit optimistic in interpreting his words as meaning the levy will be removed after 2015? What he said in the budget (and repeated in the quote in your first post) was that the levy would be 0.15% in 2014 and 2015 - but he is silent on what happens then. It could very well continue at 0.15% in 2016 or move to a different % - without him having told any porkies. I would interpret his 'I have no further plans for changing in this regard' as applying to 2014 and 2015 - i.e. he is not changing what he has already told us about - but again, silent on what lies beyond...
I really can't see it being removed ever - too easy money...
Good point.
This could end up been a 'play on words' where he will claim he never intended it to be removed at the end of 2 15 (hate when he does that!) more that he was stating what the levy would be till then.
I seriously hope I am wrong and with the GE in early 2016 he might well remove in budget 2015 and then reintroduce it in budget 2016!
LDFerguson
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Yes I possibly am being optimistic, or indeed naive to think that a Government Minister would keep his word, given that he didn't before. And I take your point that he didn't quite say that the levy would end after 2015. And he didn't quite say that it wouldn't.
In my view, if you have to hide behind verbal sleight of hand and cunning word-play like this, rather than being open and direct, it says a lot about your character.
He was asked if the levy was going to be continued indefinitely. That's a fairly straight question. He replied by saying that he had no plans to change it, thus slithering away from giving the straight answer it deserved.
