Monday, 27 July 2009


According to the Sunday Business Post yesterday, the Commission on Taxation may propose introducing a common rate for pension tax relief of around 30 per cent, thus reducing the tax benefit currently enjoyed by higher earners while increasing the relief for those in the 20 per cent income tax bracket. Writing on PE earlier this year, Dr. Jim Stewart - a member of the TCD Pension Policy Research Group, which collaborated with TASC on its pension reform proposals - pointed out that any reform of pension tax reliefs must be accompanied by reform of the pension system as a whole.

Meanwhile, if anyone was in any regarding about the inability of private pensions schemes to provide a secure retirement income into the future, PriceWaterhouse Coopers has just released the results of a survey indicating that - of those employers currently operating Defined Benefit schemes - 20 per cent are winding up, or considering winding up, their DB schemes, while 49 per cent are considering introducing a salary freeze or cap, and 39 per cent are considering removing pension increases.

With regard to Defined Contribution schemes, 9 per cent of employers surveyed indicated that they had reduced their contributions, while 32 per cent of employees have either reduced or ceased their contributions.

Any comments?


Pavement Trauma said...

Does anyone know what the proposed tax treatment will be of pension contributions from higher rate taxpayers? Is there going to be a distinction made between employer payments to a pension scheme (whether DC or DB) and employee payments to them (as Jim Stewart made reference to in the comments of the earlier PE article).

Either way, reactions to this proposal are going to be interesting.

Niall said...

Prior to the creation of this Commission (the third on taxation, not the second as RTÉ have been describing it), there was a variety of issues being discussed in relation to the tax treatment of pensions.

Some restrictions had been introduced after a long campaign in the Dáil by Joan Burton, including a ceiling on the size of pension funds and more recently the salary/income on which relief for contributions is based. Assumed level of withdrawals, etc.

Any further adjustment on relief for contributions should be seen in light of what is happening to the SW Contributory Pension and also to the treatment of redundancy payments, whether ex gratia or statutory.

While many pension schemes in particular the Small Self Administered Pension Schemes had become no more than tax relieved investment funds, where tax liability was deferred almost for ever, further tax restrictions without considering the implications and making the appropriate changes may be counterproductive.

Action on issues such as fees and commissions, charged and paid are as important part of getting the pension issue sorted.

While McCreevey was amending the tax rules around the pension schemes of the rich, he also cut 2% off the employer PRSI rate and robbed £650M for tax cuts from the Social Insurance Fund.