Brendan Burgess
Founder
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Pensions
I will start with Government pension policy. The pensions sector is a very important part of the financial services industry in Ireland and provides a service to enable people to make provision for their retirement and for their old age. As it is in everyone’s best interest the Government wishes to encourage as many citizens as possible to continue to invest in pension schemes.
However, some people have been allowed by previous Governments to benefit from hugely generous pension arrangements subsidised by the taxpayer. While this Government wants to encourage those on lower and middle incomes to save for pensions, it will not allow pensions of the scale previously allowed to be accumulated at the expense of taxpayers whose actual earnings are, in many cases, a fraction of those large pensions.
I want to clarify this Government’s policy on a number of important issues:
The retention of marginal rate relief on pension contributions coupled with the proposed changes in maximum tax relieved pension pots will preserve and target tax relief to those providing for pensions up to €60,000 per annum.
Constitutional and legal constraints severely limit what steps the Government can take in relation to pensions already in payment. However, in order to ensure equity between all citizens based on their level of income, the reduced rate of USC for those over seventy with an income in excess of €60,000 will be discontinued from the 1st of January 2013 and the standard rates of USC will apply.
In addition, in the interest of fairness, Top Slicing relief will no longer be available from the 1st of January 2013 on ex-gratia lump sums in respect of termination and severance payments where the non-statutory payment is €200,000 or over. At present the individual’s average tax rate for the previous three years applies to such lump sums rather than the marginal rate of 41 per cent.
I will start with Government pension policy. The pensions sector is a very important part of the financial services industry in Ireland and provides a service to enable people to make provision for their retirement and for their old age. As it is in everyone’s best interest the Government wishes to encourage as many citizens as possible to continue to invest in pension schemes.
However, some people have been allowed by previous Governments to benefit from hugely generous pension arrangements subsidised by the taxpayer. While this Government wants to encourage those on lower and middle incomes to save for pensions, it will not allow pensions of the scale previously allowed to be accumulated at the expense of taxpayers whose actual earnings are, in many cases, a fraction of those large pensions.
I want to clarify this Government’s policy on a number of important issues:
- Tax relief on pension contributions will only serve to subsidise pension schemes that deliver income of up to €60,000 per annum. This will take effect from 1st January, 2014.
- Tax relief on pension contributions will continue at the marginal rate of tax.
- The Pension Levy announced as part of the Jobs Initiative will not be renewed after 2014.
The retention of marginal rate relief on pension contributions coupled with the proposed changes in maximum tax relieved pension pots will preserve and target tax relief to those providing for pensions up to €60,000 per annum.
Constitutional and legal constraints severely limit what steps the Government can take in relation to pensions already in payment. However, in order to ensure equity between all citizens based on their level of income, the reduced rate of USC for those over seventy with an income in excess of €60,000 will be discontinued from the 1st of January 2013 and the standard rates of USC will apply.
In addition, in the interest of fairness, Top Slicing relief will no longer be available from the 1st of January 2013 on ex-gratia lump sums in respect of termination and severance payments where the non-statutory payment is €200,000 or over. At present the individual’s average tax rate for the previous three years applies to such lump sums rather than the marginal rate of 41 per cent.