The Government last night announced a levy of 0.6% of the market value of private pension funds.
This is intended to raise €470 million this year for the exchequer, and the scheme is intended to run for 4 years from 1st January 2011.
The levy will apply to occupational pension schemes, personal pensions and PRSA’s.
The levy does not apply to public service pensions.
This levy is being marketed as part of the Jobs Initiative. Realistically, it’s another taxation on private citizens, and a revenue gathering measure by Government.
Bear in mind that the last ‘temporary’ levy on life assurance and pension premiums (introduced in July 1984) lasted for 8.5 years. It was also increased from 1.67% to 3% after just 2 years.
It’s important to highlight that pension tax relief has already been SUBSTANTIALLY cut in recent years:
- The reduction in the pensionable earnings limit to €150,000 in 2009 is estimated to have yielded €100 million in savings.
- The removal of PRSI & USC relief on employee pension contributions in 2011 is estimated to yield €60 million in savings.
- The further reduction in the pensionable earnings limit to €115,000 in 2011 is estimated to yield €55 million in savings.
- The removal of 50% employer PRSI relief on employee pension contributions is estimated to yield €90 million in savings.
- The reduction in the Standard Pension Fund Threshold to €2.3 million in 2011 is estimated to yield €20 million in savings.
- The increase in ARF deemed distributions from 3% to 5% is estimated to yield €5 million.
- The reduction on the limit on tax free lump sums to €200,000 is estimated to yield €5 million.
Add this lot up and the pensions sector has already contributed savings of €335 million, BEFORE the new levy is applied.
In exchange for this, the Minister for Finance will ‘review’ possible further reductions in tax relief next year.
We will keep you further informed as the mechanics of the levy are finalised.