Pension Levy Update

Pension Fund Levy – Further Update

Despite fierce opposition and much criticism, the Finance Bill (No.2) 2011 was passed into law on 22nd June last. This bill provides the legislation for the introduction of the levy on pension schemes announced in the recent Jobs Initiative.

Key Points:

  • A levy of 0.6% on the market value of pension assets under management, to raise €470 million per year.
  • The legislation specifically refers to the years 2011 to 2014. As such, the Levy will apply for four years (for now…).
  • The first valuation date is 30th June 2011, and payments for 2011 are due to Revenue by 25th September next.
  • For 2012, 2013 and 2014 the valuation date will also be 30th June, and payments will be due by 25th September annually.
  • Applies to company pensions, buy out bonds, self administered pensions, personal pensions and PRSAs.
  • The Levy will not apply to Approved Retirement Funds/Approved Minimum Retirement Funds or to vested (retired) PRSAs.

What plans are exempt from the Pension Levy?

As mentioned, the levy will not apply to ARFs, AMRFs and vested PRSAs. Bear in mind that ARF contracts already have a taxable deemed distribution of 5% per annum.

Company pension schemes where the trustees have already passed a resolution to wind up the scheme provided that the employer is insolvent are exempt.

Company pension schemes set up for the benefit of employees employed outside the State are also exempt.

Who deducts the Pension Levy?

Where the pension assets are held with a life company then that life company is charged with deducting the levy. Most life offices have aready deducted the levy at the end of June, and will remit the relevant amount to the revenue on the policyholders behalf.

Where the pension assets are not held in life assurance contracts, then the scheme administrator is responsible for calculating and paying the levy to the Revenue Commissioners. Self administered pensions are the most obvious plans affected here. A substantial penalty of €380 per day applies to late payments.

CFS Comment

We have had a huge amount of feedback about this Levy, pretty much all negative.

Broadly speaking, the levy has been viewed as nothing more than a smash and grab on private savings. People are worried about where the government might look to next as a source of ‘easy money’ to shore up our national finances.

As advised in our previous update, the private pensions sector has already contributed savings of €335 million over the last 2 years. Follow this link for a detailed breakdown of this amount.

Our view remains that long term pension planning is compromised by this Levy.

Finally, if you are aged 60 or over, please contact us about exploring all means of mitigating the impact of this levy on your pension.

As ever, don’t hesitate to contact us on 01 497 2133 should you have any questions at all. We also welcome your feedback at info@cfsireland.com

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