# Disagree with the new pension levy



## Skybox

Is this going to be an annual tax or a once off?

My husband's pension is substantial enough - he has long years of service and put our savings into AVCs.  He thinks we are looking at another substantial bill 

Just how much more can they take off people? What is the point of having a pension any more?


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## z107

> Just how much more can they take off people?


How much have you got in your pension fund?

I suppose the 0.5% rate will increase as people stop contributing.


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## boaber

It could be the lesser of two evils though.  Looks like a compromise for not reducing tax relief down to 20% for all, which would have made a lot of people stop contributing all together.

If you have a fund of €100,000, then you'll be paying €50 in tax, not a huge amount in the whole scheme of things


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## Eeyore

boaber said:


> It could be the lesser of two evils though.  Looks like a compromise for not reducing tax relief down to 20% for all, which would have made a lot of people stop contributing all together.
> 
> If you have a fund of €100,000, then you'll be paying €50 in tax, not a huge amount in the whole scheme of things



€100,000 @ 0.5% is €500


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## DerKaiser

It is sizeable.

Say you put in €5k at the age of 35, they'll have taken €700 of this or 14% by the time you retire at 65.

The pension provider might charge you 1% p.a.

Combining both of these, 37% of your €5k would be taken by age 65.  You'd be relying on some very decent out performance in your funds to beat inflation. It might still be worthwhile if you are getting 41% relief on the way in and paying zero tax in retirement, but it starts to make less or no sense if you get less than 41% relief on contributions or if you end up paying even the standard rate of tax in retirement.

You'd actually need some fairly sophisticated calculations to work out the best course of action at any point in time but for me this shifts the balance towards non-pensions savings/paying off mortgage/paying off debts/etc when you are younger and then maxing out pensions contributions in the last 20 years rather than paying a steady amount in over 30 or 35 years.


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## boaber

Eeyore said:


> €100,000 @ 0.5% is €500



oops


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## Duke of Marmalade

The really interesting piece is that legislation will permit existing schemes to reduce pensions in order to pay for this.  The required reduction is of course exactly the same as the levy i.e. 0.5% to 0.6%.  So people in private pensions can expect their pensions to reduce by this amount per annum so long as the levy is in force and if the levy is ever stopped the pension will stay at the reduced level.

Okay so now we see that the crisis has hit the following sections of society:

People who lost their jobs
People in the private sector who have seen their salaries at best stagnate and their bonuses vanish
Avtive public servants who have seen heavy cuts in their remuneration
Social welfare recipients
_and now_
Private sector pensioners

The following groups remain unscathed:

Public sector pensioners
Old age pensioners
Semis state workers and pensioners


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## TheFatMan

I have a good well paid job and a good standard of living.
But I was frugal, I put as much as I possibly could aside into my pension for fear that the state wouldn't be able to provide for me when I reach retirement. I could have taken the money invested in pension and bought bulgarian property with it but I didnt.

I am now going to be screwed over for the next 4 years and have close to 3K taken out of my pension fund as a punishment for being fiscally cautious when every other lunatic was taking 4 holidays per year and buying up half of eastern europe. 

I'm married to a public sector worker and we've had our incomes filleted over the last 2 years. 

This is too much. Anyone know of anyway to remove funds from a DC scheme that I've contributed to for the last 10 years? Or do they have me by the short and curlies as I suspect they do.


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## Skybox

Eeyore said:


> €100,000 @ 0.5% is €500



If you are like many older middle class people nearing retirement, you may have a fund of well over €1 million.  Suddenly 0.5% seems like a lot.  (0.5% of €1 million is €5,000 - If that is to be paid every year for 4 years  now you see how much of an impact it could have on people's pension fund.)

I get the impression from today's news that this 'tax' will be taken from the pension fund, rather than asking people to cough up themselves - is that correct??  

My husband won't be entitled to the state pension so he thought he was being prudent by putting as much of our savings in to his retirement fund - he could live to be 80 or 90. 

I don't believe this 'levy' will only be in place for 4 years.  It could become like the old 'health' levy that is now part of the USC. It is, in effect, a confiscation of our retirement funds.  
Talk about moving the goalposts - this is changing the entire game!


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## Slim

Conan said:


> Presumably the proposed Levy will apply to funded semi-state schemes (such as ESB etc). It seems that unfunded schemes escape the Levy, mainly -but not exclusively- civil servants. It might be argued that working Civil Servants have made a contribution (the increase in their pension contribution - though that is arguable) but the group that seems to escape entirely is retired civil servants and retired politicians whose pensions are not paid by annuity but rather out of the public purse.


 
It's not arguable. Working PUBLIC servants have had pay cuts and a Pension Levy. Retired Public Servants have had their pensions cut by 6%to 9%.


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## Sunny

It's a disgraceful suggestion. Why I should be taxed to pay for some pie in the sky job creation scheme just because I have a pension when people who dont have a pension or work in public sector don't have to pay. Why not impose the levy on savings accounts and other investments. Why pick on private pensions? I agree with the poster who says it is probably no longer advisable to pay into a pension until later in life.


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## T McGibney

I agree that it is a disgraceful idea, which if implemented will undermine the entire rationale behind saving for retirement.


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## z107

> Why not impose the levy on savings accounts and other investments.


That's coming. 

These are the last actions of a failed state. Instead of letting the banks fail and deposits get wiped out, savings, pensions and investments are raided by means of 'taxes'.

As soon as I get my wages, I try to move it out of the Irish government's grasp as soon as possible. Pension funds are easy pickings, and 0.5% is just the start.


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## Complainer

Duke of Marmalade said:


> The following groups remain unscathed:
> 
> Public sector pensioners
> Old age pensioners
> Semis state workers and pensioners


You seem to have a different definition of 'unscathed' to most people. Have you heard of the income levy? Have you heard of the across the board reduction in public sector salaries, affecting staff and pensions by 6%-9%?


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## Neg Covenant

My first concern is how much my pension administrators will charge me for paying this tax. They charge me plenty for doing absolutely nothing other than mirroring the markets. This is not a skill worth paying for in my book.

In my view, the tax relief for pension contributions is a massive subsidy to an inefficient, incompetent, rent-seeking leech of an industry.

I do not mind paying more tax out of my pension if that is what is needed. However, I would be much happier if I were being forced to buy into a fund dedicated to funding Irish business start-ups, and I could sell my share on to somebody else. That way the money would hopefully create jobs and would be applied on the basis of commercial criteria, meaning the jobs would be more likely to be sustainable.


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## T McGibney

Neg Covenant said:


> I would be much happier if I were being forced to buy into a fund dedicated to funding Irish business start-ups



The last place I would want to invest my own pension pot would be in a business start-ups fund.


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## z107

> I do not mind paying more tax out of my pension if that is what is needed. However, I would be much happier if I were being forced to buy into a fund dedicated to funding Irish business start-ups, and I could sell my share on to somebody else. That way the money would hopefully create jobs and would be applied on the basis of commercial criteria, meaning the jobs would be more likely to be sustainable.


The best way to help Irish business start-ups would be to reduce the amount of tax they pay. There should be incentives to start up businesses. At the moment, there are huge disincentives. How about removing these first? Increasing the tax burden for pension holders will just reduce the number of pensions. It is also another reason for leaving Ireland entirely.

As an SME owner, I do not believe that people should be forced to invest in companies like mine.

No doubt this fund for start-ups will be riddled with expensive, time consuming red tape, and will need plenty of people to administer it. I hate it.


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## Don_08

Sunny said:


> How will it work on DB schemes? Easy to impose on a DC scheme because the value of the fund is clear. That's not the case with DB schemes many of which have basically a minus value.


 
I think you are confusing deficit/surplus with assets.

Plenty of DB Schemes have liabilities in excess of their assets - but they all have assets, and substantial ones.

This tax is a disgrace, is there any guarantee they will still not implement the reduction in tax relief over the next few years in addition?


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## Duke of Marmalade

Sunny said:


> The value of a DB scheme isn't simply the assets in the fund as of today though so is this a tax on assets or values?


_Sunny_, not sure what point you are making here.  I know old style actuarial valuations might have valued DB assets at something different from their market values but I presume the levy will be on the market value of the assets which is just as tangible and observable as in a DC scheme.

I agree with the general negativity of the sentiment in this thread but let us remind ourselves where this originated.  The 4 year plan wanted €700M a year from the pensions industry.  The original proposal was to get this by reducing tax relief on contributions, which would have killed the pensions industry.  The industry naturally lobbied for the levy on the grounds that it would be the lesser evil to hit those who have already been sold pension plans than to kill new business.   

I thought it was a doomed attempt because of the parlous state of DB schemes but that has been solved by allowing DB schemes to pass on the charge by a reduction in pensions.

This is a huge break with tradition, needing legislation.  It would be like the government applying a levy on company's payrolls and permitting companies to reduce the pay of their staff irrespective of any contractual arrangements.


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## goingforgold

Skybox said:


> If you are like many older middle class people nearing retirement, you may have a fund of well over €1 million.


 
I'm not sure this is still the case given the collapse of pension fund values and if it is then they are not the worst affected. 

However agree that this would be an awful measure if enforced and would really question why people in the private sector should bother to try and fund their retirement. Not sure if this is even legal!


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## Baracuda

ajapale said:


> Also since these schemes are final salary schemes current employees who have or will endure pay cuts will presumabley be retiring on pro rata reduced pensions? Is this interpretation correct?


`Sure is correct. Beginning to lose faith in FG. A few short months ago FG promised to maintain tax relief at the marginal rate and instead introduce a pensions levy http://www.independent.ie/national-news/elections/fgs-grand-plan-2523141.html which I though was fair enough but now they have said that they will reduce the tax relief down to 33% http://www.independent.ie/business/irish/pensions-relief-decision-welcomed-2634841.html And they wonder why we the public have lost faith in politicis


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## Complainer

Baracuda said:


> `Sure is correct. Beginning to lose faith in FG. A few short months ago FG promised to maintain tax relief at the marginal rate and instead introduce a pensions levy http://www.independent.ie/national-news/elections/fgs-grand-plan-2523141.html which I though was fair enough but now they have said that they will reduce the tax relief down to 33% http://www.independent.ie/business/irish/pensions-relief-decision-welcomed-2634841.html And they wonder why we the public have lost faith in politicis



Seeing as FG didn't get an overall majority, you can't really expect them to implement every detail of their manifesto. Coalition Govts inevitably involve some degree of horse-trading over policies.


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## Gekko

Slim said:


> It's not arguable. Working PUBLIC servants have had pay cuts and a Pension Levy. Retired Public Servants have had their pensions cut by 6%to 9%.


 
Because the country is insolvent and can no longer overpay public servants and retired public servants.

This levy is a disgrace. A mid level employee in the public sector is guaranteed a pension that someone in the private sector has to salt away millions to fund. On the one hand the State are telling us about the pensions timebomb and on the other they're making it nigh on impossible to do so.


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## Yorrick

People voted for change. When Enda and FG is finished with ye thats all you will be left with except it will be loose change


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## thedaras

Just another scheme that will bring an even bigger divide between private sector and public sector workers..


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## ajapale

Hi thearus,

It is my understanding that the scheme *will* apply to large sections of the public sector (ie the large commercial semi state funded superannuation schemes ESB etc). These funded superannuation schemes did not/could not form part of the original public *service* pension levy.

Of course the proposed pension fund tax cannot apply to unfunded schemes such as exist in the public *service* as there is no fund to apply the tax to!

aj


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## liaconn

thedaras said:


> Just another scheme that will bring an even bigger divide between private sector and public sector workers..


 

The public sector are already paying a pension levy and have also taken two large paycuts on top of the income levy.


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## z107

looks like the government didn't want any strikes... just yet:
http://www.independent.ie/national-news/public-sector-exemption-on-pensions-levy-unfair-2640808.html

Does the means by which our money is taken from us matter anyway? The government has already made the decision that we are all going to pay for their incompetence and gross mismanagement. There will be plenty more public sector cuts and taxes over the next few months.

If you are not affected by this, you will probably be affected by the next tax or the levy after that.
(Unless you are a government minister, of course)


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## ajapale

liaconn said:


> The public sector are already paying a pension levy .


 
This is not correct :- the public *service* is paying a pension levy. But very large chunks of the public *sector* (commercial semistate sector)are not paying a pension levy. ESB etc. I understand the the proposed pension fund tax will be applied to these very large public *sector* schemes.


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## liaconn

Well, that is okay then. My point was that people not paying the proposed fund tax are already paying a pension levy.


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## thedaras

Looks like it may be challenged
[broken link removed]


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## PaddyW

So is this levy a definite then? When does it come into effect?


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## Sunny

0.6%. Are these guys serious?


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## thedaras

I believe it is only a matter of time before it will be challenged.
Eddie Hobbs not too happy about it and mentioned people should adopt someone from the higher echelons of the PS.


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## Deiseblue

thedaras said:


> I believe it is only a matter of time before it will be challenged.
> Eddie Hobbs not too happy about it and mentioned people should adopt someone from the higher echelons of the PS.



I would be extremely surprised if any challenge comes from the pension industry.

They are well aware that any challenge may prompt the Government to move rather more quickly than envisaged on the question of tax relief on contributions.


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## ajapale

> Jerry Moriarty, IAPF director of policy, confirmed legal advice had been  sought on the basis the levy could be an interference with property  rights. There is also a question of discrimination given that only  private sector pensions would be affected.


If the new levy is applied to the big ESB DB pension funds it is unlikely that any appeal based on public/private sector discrimination would succeed.

If the levy is based on interference on property rights then I think it might have a better chance.

Could a challenge be made on the basis that the proposal is aegist? Since 0.6% of a pension pot built up by a 20 year old is far less than 0.6% of a pension pot up by a 60 year old?


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## orka

Deiseblue said:


> I would be extremely surprised if any challenge comes from the pension industry.
> 
> They are well aware that any challenge may prompt the Government to move rather more quickly than envisaged on the question of tax relief on contributions.


The levy will have a big impact on pensions new business too - at least with changes in tax relief (/deferral) you know where you stand - but a levy on money that you can't access to send elsewhere is nasty and I can't see many people being in a rush to offer up more of their money to be potentially levied in the future - who's to say the levy won't increase to 1% or 2% - and no way out... 

Tax relief on the way in, levied between contributing and retiring, exposed to the potentially rubbish performance of private pension funds and then fully taxed and income levied on the way out, most likely at higher rates than the relief you got going in - not overly attractive...

Oh, and if you have an employer-paid PRSA, you'll pay income levy on the way in and on the way out...


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## Complainer

orka said:


> The levy will have a big impact on pensions new business too - at least with changes in tax relief (/deferral) you know where you stand -


You don't really know where you stand. There is no guarantee of what the tax rules will be when you come to draw down the pension in the future.


Sunny said:


> 0.6%. Are these guys serious?



Yeah, 41% or better relief on the way in, and 0.6% on the fund for 4 years - just to keep it in context.



thedaras said:


> Looks like it may be challenged
> [broken link removed]


I guess the trustees/administrators/funds mustn't be quite on the breadline yet if they can afford to mount a challenge. It is very hard to see how any challenge could succeed, given that the challenges to the public sector levy failed. But hey, why not keep a few poor barristers in funds for a few more months.


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## Sunny

Complainer said:


> Yeah, 41% or better relief on the way in, and 0.6% on the fund for 4 years - just to keep it in context.
> 
> 
> .



And what do I pay on the way out? I could put your tax deductable pension levy into context but could not be bothered.


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## Complainer

Sunny said:


> And what do I pay on the way out?.



Who's going to win Saturday's JLT Lockinge Stakes at Newbury? None of us can see into the future.



Sunny said:


> AI could put your tax deductable pension levy into context but could not be bothered.


Oh please do. Please do put the 5%-8% tax deductable levy (which is levied on some people who get no pension at all) in context with the 0.6% fund charge for 4 years. Which would you choose, if you got to pick?


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## ajapale

Complainer said:


> ... given that the challenges to the public sector levy failed...


  Was a legal challenge raised against the public _*service*_ "pension" levy? On what grounds was it challenged? On what basis did any challenge to the public _*service*_ pension levy fail?


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## Deiseblue

From memory I believe that the Unions took legal opinion as to whether any challenge to the PS pension levy would be successful .

The answer was NO .


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## DerKaiser

It's pointless to comparing public service pension arrangements to private sector pension incentives.

If you benefit from neither you probably feel (correctly) that you are subsidising both.

If you benefit from one or the other you should probably appreciate the benefit you get and feel sorry for the guy who's not able to benefit from either, rather than sniping at the benefits/incentives availed of by others.


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## Complainer

ajapale said:


> Was a legal challenge raised against the public _*service*_ "pension" levy? On what grounds was it challenged? On what basis did any challenge to the public _*service*_ pension levy fail?


http://www.independent.ie/business/...ail-in-challenge-to-pension-levy-2371925.html


DerKaiser said:


> It's pointless to comparing public service pension arrangements to private sector pension incentives.
> 
> If you benefit from neither you probably feel (correctly) that you are subsidising both.
> 
> If you benefit from one or the other you should probably appreciate the benefit you get and feel sorry for the guy who's not able to benefit from either, rather than sniping at the benefits/incentives availed of by others.



Fair points - let's not forget that many people have both public and private pensions, having worked in both sectors, or having purchased AVCs to supplement their public pension.


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## boaber

Complainer said:


> Who's going to win Saturday's JLT Lockinge Stakes at Newbury? None of us can see into the future.



Based on this thread, I'd say [broken link removed] would be appropriate!



			
				Complainer said:
			
		

> Oh please do. Please do put the 5%-8% tax deductable levy (which is levied on some people who get no pension at all) in context with the 0.6% fund charge for 4 years. Which would you choose, if you got to pick?



A lot of private sector employees already have to pay a % (5% being the standard, but could be more) of their salary into their pension scheme, and have done so for years.  It's called a contribution, rather than a levy.


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## Complainer

boaber said:


> A lot of private sector employees already have to pay a % (5% being the standard, but could be more) of their salary into their pension scheme, and have done so for years.  It's called a contribution, rather than a levy.


Public servants pay a 6.5pc contribution AND the levy.


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## thedaras

Deiseblue said:


> They are well aware that any challenge may prompt the Government to move rather more quickly than envisaged on the question of tax relief on contributions.



I think this is a good point,in that they will get it either way..

That being said ,I also think that its showing that they are laying a pathway for more PS cuts and will use this to justify them?


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## Yorrick

*Squeze the rich until the pips squeak.*

*This Government is of the opinion that anyone who had the wisdom to invest in their pension fund are rich and Labour believe that they must be hammered.*

*The ones to blame are those who believed all that Labour guff about change. *
*Leopards don't change their spots. Their idea of an equal society is to drag everyone down to the level of the social welfare scroungers.*
*The people had an opportunity to keep them out of Government but did not take it.*


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## Howitzer

Complainer said:


> Oh please do. Please do put the 5%-8% tax deductable levy (which is levied on some people who get no pension at all) in context with the 0.6% fund charge for 4 years. Which would you choose, if you got to pick?


Ignoring all other hot potatoes and just answering this very narrow question - it depends.

0.6% of your entire fund for 4 years or, an average, tax deductible 5-8% for the rest of your working life? 

If you've already retired. It's a no brainer, income levy please.

If you're going to retire in the next 15 years it's probably a no brainer, the pension levy will have a far greater effect on your overall financial position.

Over 15 years and it swings towards the income levy having more of an adverse effect. 

But then again those more recent entrants to the PS have been getting it from every direction anyway. It's just another another example of the most senior members of the PS pulling up the ladder before they take the flight to Marbella.


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## Sunny

Complainer said:


> Who's going to win Saturday's JLT Lockinge Stakes at Newbury? None of us can see into the future.
> 
> 
> Oh please do. Please do put the 5%-8% tax deductable levy (which is levied on some people who get no pension at all) in context with the 0.6% fund charge for 4 years. Which would you choose, if you got to pick?


 
But we know what we are going to paying out right now don't we? So what tax rate do people pay on the way out of their pensions since you think the tax relief on the way in such a big deal.

The simple fact remains that we had politicians standing up yesterday defending a raid on individuals savings by saying this is simply a claw back of some of the tax relief enjoyed by people. Public sector workers enjoy the same tax relief on their pension levy (contribution). Why were they not hit as well? And by the way, I don't want to see public sectors hit but I certainly don't see why they targeted one part of the population. Already I have read reports in international media about how the Government is doing an Argentina on private assets.


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## Shawady

The was a jouranlist on RTE this morning supporting the measure. He admitted it was an extreme measue but justified under the present economic circumstances we are in.
From what I could make out, he said this was the best way of raising money through taxation that would not have as much effect on current household spending. I may have got it wrong but I took it that this is money that has been put away for the future so in the majority of cases , may not affect people's spending habits at the moment.


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## thedaras

As I understand it the levy could be passed on to the person ,for example they say it comes from the "Fund",but the funds are in major trouble anyway,so it may well be passed on to the employee..I cant see any employer making up the difference..

And as an aside,re your comment about the RTE journalist,as much those who are more left wing inclined dismiss most of what the sindo print,I could also say the journalists on RTE are in fact public servants and why wouldn't they say its justified..


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## Sunny

Shawady said:


> The was a jouranlist on RTE this morning supporting the measure. He admitted it was an extreme measue but justified under the present economic circumstances we are in.
> From what I could make out, he said this was the best way of raising money through taxation that would not have as much effect on current household spending. I may have got it wrong but I took it that this is money that has been put away for the future so in the majority of cases , may not affect people's spending habits at the moment.


 
You are still raiding people's savings. There is no difference to what they did yesterday to them putting a 0.6% levy on saving accounts or any other investments except that people are stuck into pension funds and can't move money. Do it to deposits and you would see a flow of capital out of this Country and rightly so. They can defend it all they like but at the end of the day, it is an extremely dangerous precedent to set.


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## Complainer

Yorrick said:


> *This Government is of the opinion that anyone who had the wisdom to invest in their pension fund are rich and Labour believe that they must be hammered.*
> 
> *The ones to blame are those who believed all that Labour guff about change. *
> *Leopards don't change their spots. Their idea of an equal society is to drag everyone down to the level of the social welfare scroungers.*
> *The people had an opportunity to keep them out of Government but did not take it.*


So those who recieved social welfare are 'scroungers', but those who benefited from 41% or better tax relief to subsidise their pension have to be protected?

This is a very modest contribution from those who have modest assets. If they have a huge fund, they can well afford the contribution.

It's almost funny to see the reaction of some when the reality that those who gained most from the boom years have to share the pain of getting us out of this economic mess.



Sunny said:


> Public sector workers enjoy the same tax relief on their pension levy (contribution). Why were they not hit as well?


They were already hit! The pension levy (which is seperate to and in addition to the pension contribution) was the hit - and it was much larger than this hit!


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## Shawady

The journalist was Dan O'Brein for the IT. He was on the Pat Kenny show. Don't know if he is consider left wing or not.
I'm just relaying the point he made that the government had to raise money and this was way of doing would not have as much impact in the short term and may be the way to go rather than just direct taxation.


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## Deiseblue

Dan O ' Brien is the economics editor of the Irish Times - about as far removed from a left leaning public servant as it's possible to get


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## Howitzer

Complainer said:


> The pension levy (which is seperate to and in addition to the pension contribution) was the hit - and it was much larger than this hit!


As I pointed out, no it wasn't. Or at least not in every case.


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## gianni

Sunny said:


> Public sector workers enjoy the same tax relief on their pension levy (contribution). Why were they not hit as well?



I'm sure Public Service workers might argue why they were hit with stringent pension levys when the private sector worker remained unscathed with any tax hikes ?

(I realise that there were subsequent tax hikes but these also hit Public Service workers).

I guess the diktat of 'everyone must pay but start with the other guy first' will always hold through. I'm not having a go at either sector in particular. It's human nature to feel very aggrieved at having your income attacked and being powerless to do anything about it.


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## ajapale

The Fianna Fail spokesman on Morning Ireland this morning pointed out that the new pension fund levy will be applied to the funded public sector schemes.


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## DerKaiser

Sunny said:


> You are still raiding people's savings. There is no difference to what they did yesterday to them putting a 0.6% levy on saving accounts or any other investments except that people are stuck into pension funds and can't move money. Do it to deposits and you would see a flow of capital out of this Country and rightly so. They can defend it all they like but at the end of the day, it is an extremely dangerous precedent to set.


 
I agree about the precedent, we need certainty around retirement planning.

However, I would look at it in the following context:

1) I expect we'll be paying property taxes of 0.25% to 0.5% of our property values in the near future

2) We already pay about 0.8% of our savings in dirt tax per annum (assuming you can get a 3% savings rate)

Money will be squeezed out of each and everyone of us in a variety of ways.  

I just hope that this measure does not completely disincentivise saving for retirement.


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## northsideboy

Complainer said:


> Public servants pay a 6.5pc contribution AND the levy.



In addition the contributary OAP which other workers receive is not given to Public Sector Workers most of whom (post 95 entry) pay the ame level of PRSI as everyone else.


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## ajapale

northsideboy said:


> In addition the contributary OAP which other workers receive is not given to Public Sector Workers most of whom (post 95 entry) pay the ame level of PRSI as everyone else.


 
This statement is muddled up.

Post '95 public servants (and many thousands of workers in the commercial semi state public sector ) pay the same level of Prsi as anyone else and as such they are entitled to the COAP.


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## northsideboy

Yes but that the OAP is deducted from your work pension (public service) if I'm not mistaken.


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## roker

Quote:
The following groups remain unscathed:

Public sector pensioners
Old age pensioners
Semis state workers and pensioners 

Wrong, Old age pensions are paying USC on their private pension


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## thedaras

Does anyone think based on what Eddie Hobbs is saying, that now is the time to  withdraw any cash we have in the bank,(ie our last fiver..) and moving it to another currency?
Hobbs is calling it theft Tuesday, and if that is the case nothing remains sacred.

Just as a matter of interest,will those of you who are PS workers be still OK with it,when/if it is extended to the PS in some other similar form ..(I understand there is no fund) but in some other form?


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## Chris

I agree with the thread title that it is a total disgrace to be taxing private pension funds. Of course it is an easy target as people cannot move their funds out. Sunny makes a very good point about this setting an extremely dangerous precedent, and in my opinion this is going to be just the start of things to come. 

I believe I read somewhere that Noonan said that there would be a time limit built into the legislation (4 years?), obviously to make this more sellable to the public. Anyone taking bets that in 4 years time this "temporary" tax will just be extended indefinitely?

What disgusts me most about this tax is the point already made, that it simply is clawing back some of the tax relief enjoyed by those paying in, when in fact people are simply deferring the tax payment until the time when they retire and withdraw funds.
It also didn't take long for comments to arise about those that can best afford to pay should pay. What this tax is doing is punishing those with the foresight and frugality to set money aside for the future. It is nothing more than the theft of private property!

This latest tax is taking me one step closer to packing up and leaving this country, and there are not many steps left before I do.


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## Duke of Marmalade

DerKaiser said:


> Probably not - could the DB Pensioners get a transfer value and purchase an annuity from a 3rd party to avoid this tax?


Not sure that option is generally available, and if it were I guess the annuity would be way less than the foregone pension (a) coz insured annuity rates are puny and (b) coz the fund is probably in deficit. 

Eddie was on Joe Duffy today, not by invite, he phoned in. He was apoplectic (Joe's words, actually Joe's stand in). Eddie refuses to call this a tax/levy/stamp duty, to him it is a confiscation. He was 'opping mad. Thin edge of the wedge etc. First time ever. Once we accept confiscation where will it all end, deposits next? PO savings? 

I was fairly relaxed about this 0.6% until then but Eddie was so incandescent he finished up convincing me he had a point.

To think that the insurance industry lobbied for this "confiscation" just so there would be minimal damage to new business.


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## DerKaiser

Duke of Marmalade said:


> To think that the insurance industry lobbied for this "confiscation" just so there would be minimal damage to new business.


You seem to have an ongoing beef with this.

The levy will reduce the attractiveness of pensions but the tax regime will still provide an incentive in many situations to save for retirement.

There were two straight options from what I understand:
1) Significantly reduce the relief on new money
2) tax existing money

From what I can see option 1) would leave the beneficiaries of the generous tax regime from the past untouched whilst closing the door on those looking to start putting more money away from now.  

As regards the pensions industry, the life insurance companies naturally want to maintain some sort of incentive for people to save, so they favoured what they saw as the lesser of two evils.

I believe the DB schemes were more in favour of defending the position of the already underfunded position of existing members. Probably because they don't care so much about future pension provision as most of the schemes are closed to new members.

There is absolutely nothing to stop governments taxing wealth in whatever way they want.  As I've said before, even a person earning 3% interest in the bank is having 0.8% of their savings "confiscated" each year.  And we'll have a similar story when property tax is introduced.  Eddie's apoplexy is a bit melodramatic in this context!!


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## orka

DerKaiser said:


> As I've said before, even a person earning 3% interest in the bank is having 0.8% of their savings "confiscated" each year.


There's no confiscation of capital though - if there's no growth, there's no tax. To add insult to injury, my pension fund value has gone down in value since January so the actual amount taken from today's fund (or whenever they actually take the money) will be more than 0.6% of the fund - not massively but the principle annoys me.
At least removing tax relief at entry would have given people a choice whether to invest or not - this is a smash and grab on funds which cannot be diverted at all - we're sitting ducks.

It's also doubly penalising those close to retirement - they will have the biggest funds so will pay the most and they will also be (hopefully) in low-risk, low return funds - so hitting them for 0.6% pa will put quite a dent in their annual return - younger pension holders will probably in funds offering (ho ho ho) higher returns so 0.6% should be recovered in time.


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## Sunny

It is in no way a tax on wealth.


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## Panacea

thedaras said:


> Does anyone think based on what Eddie Hobbs is saying, that now is the time to withdraw any cash we have in the bank,(ie our last fiver..) and moving it to another currency?
> Hobbs is calling it theft Tuesday, and if that is the case nothing remains sacred.


 
Lately I have been concerned about having all my €ggs in one basket and had been reading up on opening a euro denominated deposit account in UK/IOM/NI.

This will definitely become a priority issue now that the government have crossed the line of seizing assets.

Regardless of what they call it this is not a levy or a tax is it a fundamental shift in policy.

I have a small IL concensus fund (bond) and it is already down over 20% since 2007. In all likelihood the net annual returns after management fees and charges over the last 10 years has probably run at less than 2%. To SEIZE an additional 0.6% per annum over the next four years is beyond belief.

Wish someone like Eddie would take up the mantle and counter Theft Tuesday eg spearhead a visible response to demonstrate objection to the principle of seizing capital and target a given date before the end of June as the day that anyone thinking of moving deposits to another non irish bank should execute their transfers. The June date facilitates ensuring adequate time to open accounts.

*The sooner the govt remove their defined benefit snouts from the tax payer funded trough the better*.


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## ontour

My two cents:

The logic of the government that this is bringing funds back in to the country is flawed.  The majority of this money would be coming back anyway when people retire and spend it in Ireland.

A retrospective tax which is a very concerning precedence.  Later this year could the government change the income tax rates for 2011 and back date  it?

It takes no consideration of the financial state of the fund, many funds may be unable to meet the demands on them.  You might as well put a retrospective asset tax on property developers ignoring the fact that many are insolvent.

Many pension funds were significantly invested in irish companies and have not been immune to the collapse of the economy, they are not a magical pot at the end of a rainbow.

It takes no account of the difference between people on huge incomes with huge pensions and those on modest incomes/ pensions who are making provisions that reduce their future dependency on the state.

It takes far more from those close to retirement than younger people.  Certainly older people have benefited from the tax breaks on pension contributions but they are also dealing with retiring as the fund has collapsed.

It is not an equitable levy as it targets the private sector and before anyone says anything about the pension contribution that public sector workers have had to make, this is a levy, that is a contribution.  As a private sector worker I would be delighted to give the state 7-10% of my salary for the equivalent pension benefit.

There is a whole array of PRSAs, defined benefit schemes etc, the different pension providers will decide how to apply the levy with some being inevitably disadvantaged.

If this was genuinely an investment in job, the government could mandate that pension funds invest a portion of the fund in a low return state bond.  There would no capital loss for the pension fund and the state would get the capital it needs.


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## thedaras

Panacea said:


> This will definitely become a priority issue now that the government have crossed the line of seizing assets.
> 
> Wish someone like Eddie would take up the mantle and counter Theft Tuesday eg spearhead a visible response to demonstrate objection to the principle of seizing capital and target a given date before the end of June as the day that anyone thinking of moving deposits to another non irish bank should execute their transfers. The June date facilitates ensuring adequate time to open accounts..


I ,up to now, would have been happy enough with the government guarantee but now, I'm just not so sure..so Im actively looking at somewhere ,maybe Rabbo..to move my account to..Its all about trust and Im losing it.

As other posters and Eddie Hobbs has said if the government can take from a private pension fund,its the thin end of the wedge.

Either way, we lose the 0.6% on the pension for the next four years,there is ,as I mentioned earlier very few employers who will pick up the tab ..and in fact Irish Life today announced it would pass it on to the holders..if this means 4/500e  a year ,thats a lot ,especially for todays pensioners..


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## Panacea

thedaras said:


> Either way, we lose the 0.6% on the pension for the next four years...


 
You actually lose over 2.5% over your fund *forever.*  Compounding this year on year over say 20-30 years that is a pretty significant total you are losing *forever*.


With regard to opening Rabo or other non Irish bank operating here they will still be required to comply with any legislation introduced by the government. That was why I was more inclined to look to UK/IOM/NI:

firstly to guard against any potential exposure to a two tier euro,

secondly against the unlikely event of leaving the euro; and

thirdly but now somewhat more importantly against the government effectively nationalising part of your life savings

The decision to raid already depleted private pension funds in conjunction with other recent and controversial changes to abolish relief in areas such as S248 interest relief and to some extent S23 has created a degree of uncertainty that now has the real potential to undermine any credibility as to the long term security of future investment decisions in Ireland.


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## Sunny

Here is a very good post from Conan on pensions that is well worth reading.


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## Niall M

"Jerry Moriarty, IAPF director of policy, confirmed legal advice had been sought on the basis the levy could be an interference with property rights. There is also a question of discrimination given that only private sector pensions would be affected"

this guy sounded very good over the last few days on the TV/Radio.


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## Chris

DerKaiser said:


> There were two straight options from what I understand:
> 1) Significantly reduce the relief on new money
> 2) tax existing money


There is a third option of leaving things as they are and not taxing pension contributions and funds.



DerKaiser said:


> There is absolutely nothing to stop governments taxing wealth in whatever way they want.  As I've said before, even a person earning 3% interest in the bank is having 0.8% of their savings "confiscated" each year.  And we'll have a similar story when property tax is introduced.  Eddie's apoplexy is a bit melodramatic in this context!!



The main difference is that I can put my savings into an account bearing no interest and thereby avoiding any confiscation. Or I could put the funds into some other non-income producing investment.
This is not possible with pensions; there will be no way to avoid this tax.



Sunny said:


> It is in no way a tax on wealth.



Would you mind explaining how you got to that conclusion? The government is introducing a tax on the value of an asset, not on the gain or income the asset provides. In my book that is is a tax on wealth or more accurately confiscation.


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## Sunny

Chris said:


> Would you mind explaining how you got to that conclusion? The government is introducing a tax on the value of an asset, not on the gain or income the asset provides. In my book that is is a tax on wealth or more accurately confiscation.


 
Yeah sorry Chris. I just meant that this levy in no way targets the most wealthy despite what the politicians say. If I have a multi million euro pension pot, I will simply move it abroad becaause I can afford it. It also leaves out some of the people with the largest pension pots i.e. politicians and senior civil/public servants. This will mostly target ordinary workers with modest pension provisions. It's a not a tax in my eyes. As you say, it is simply a confiscation of private assets. In principle, it is no different to suddenly deciding they want 0.6% every year of what it is in my savings account. I heard Noonon go on yesterday that they wouldn't target saving accounts because we already pay DIRT. They have obviously missed the point that DIRT is a tax on interest not on my actual savings.


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## Chris

Sunny said:


> Yeah sorry Chris. I just meant that this levy in no way targets the most wealthy despite what the politicians say. If I have a multi million euro pension pot, I will simply move it abroad becaause I can afford it. It also leaves out some of the people with the largest pension pots i.e. politicians and senior civil/public servants. This will mostly target ordinary workers with modest pension provisions. It's a not a tax in my eyes. As you say, it is simply a confiscation of private assets. In principle, it is no different to suddenly deciding they want 0.6% every year of what it is in my savings account. I heard Noonon go on yesterday that they wouldn't target saving accounts because we already pay DIRT. They have obviously missed the point that DIRT is a tax on interest not on my actual savings.



OK, I see what you mean. And I agree it is not a tax on the wealthy but just a tax on/confiscation of assets. It certainly is a step too far.


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## DerKaiser

orka said:


> It's also doubly penalising those close to retirement - they will have the biggest funds so will pay the most and they will also be (hopefully) in low-risk, low return funds - so hitting them for 0.6% pa will put quite a dent in their annual return - younger pension holders will probably in funds offering (ho ho ho) higher returns so 0.6% should be recovered in time.


 
I'll avoid getting into an argument about making back the money on equity investment.

Assuming this is a permanent levy on funds.  

Those close to retirement have paid no levy for most of the term of their pension, got relief on contributions of the higher rate _plus_ PRSI, etc and stand a good chance of making it through to retirement whilst the tax free lump sum still exists.

Those starting out a pension will probably face this levy over the entire lifetime of their pension, will consider themselves lucky to get contribution relief at the higher rate for the entire term and haven't a snowballs chance in hell of there being a large tax free lump sum by the time they retire.

I cannot accept that the gilded generation of nearly retireds (who in the case of DB schemes stand the most chance of not being impacted by the underfunding position on most schemes) are at more of a disadvantage having to endure less generous tax treatment of their pension for a few years than someone starting out who'll face these less generous terms for the duration of their pension.


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## ajapale

How about a % tax on annual fund management charges?


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## DerKaiser

Chris said:


> The main difference is that I can put my savings into an account bearing no interest and thereby avoiding any confiscation. Or I could put the funds into some other non-income producing investment.


I am absolutely opposed to the levy or the reduction in tax relief on pensions contributions, but we need to accept that the state cannot afford such generous terms to incentivise private pensions provision anymore.  

In this context you have to ask what is the fairest way to reduce the monetary cost of those incentives in the short term.

I do disagree with the tax being on capital rather than interest or gains, would the following have been more acceptable?
1. Remove the gross roll up status of pensions i.e. pensions funds are taxed on income and capital gains
2. Introduce similar measures to gross roll up on non-pensions where an exit tax rate is charged on the growth of the fun in excess of contributions on a regular basis

If we assumed long term fund returns of say 4% (net of charges) and 25% exit tax rate, a 0.6% charge to funds is less onorous.


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## Niall M

Can i ask a question, why do they need to fund this new scheme, surely if they reduce the vat, ets, they expect more people to stay in hotels, more people to eat out, thus bringing in more vat (at the lower rate) to mkae up the difference?


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## Chris

DerKaiser said:


> I am absolutely opposed to the levy or the reduction in tax relief on pensions contributions, but we need to accept that the state cannot afford such generous terms to incentivise private pensions provision anymore.



I believe that the state cannot afford to not incentivise private pension provisions. The sole purpose of this confiscation is to fund a "jobs initiative" which will fail. Government cannot create jobs, all it can do is take money out of one pocket and put it into another pocket while wasting some of it. The only thing government can do to boost employment is reduce its burden on private enterprises, which means the exact opposite of what it is proposing to do.


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## alaskaonline

Complainer said:


> This is a very modest contribution from those who have modest assets. If they have a huge fund, they can well afford the contribution.



How is "modest" defined here and why are some people presuming that everyone with a pension fund in place has automatically a "huge fund". I've taken the huge fund kinda out of the context you put it in but bottom line is not everyone who has a pension fund is rich and has that money spare lying around just waiting for the government to come and take it. I am paying into a pension fund since I am 18 years old. I spent my money differently than others e.g. I didn't buy a car then or now, didn't go three times a year on holidays, didn't take out extra loans to afford a lifestyle that I really couldn't afford and instead of spending money on materialistic things I put it into a pension fund. Now who is being stung here now? Me the sensible one who thought off her future or the one splashing out more money than they have, never a bother to think off their future and therefore no pension provision in place?

I understand the government's movement to some extent but again the little people like me who scrap by every week are being punished. I read yesterday that they won't tax savings as DIRT is already in place. If they do go near the idea of taxing savings, the few frogs I have left in my account will be quickly spend and I start joining the loan people as banks don't care anyway and the government is not penalizing those who are dealing irresponsible with money (banks etc.).

Now you can all jump at me and tell me I got it all wrong


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## Complainer

Chris said:


> I believe that the state cannot afford to not incentivise private pension provisions.


This seems most strange, coming from the guy who wants the Govt to stay out of everything. Everything except subsidising the pensions of middle and upper classes it seems.


Chris said:


> What disgusts me most about this tax is the point already made, that it simply is clawing back some of the tax relief enjoyed by those paying in, when in fact people are simply deferring the tax payment until the time when they retire and withdraw funds.


If you want to spin pension tax relief as a 'defereral', then I'm going spin this levy as simply an advance tax payment - you're just paying a little bit of the tax now (when the State needs it badly) and you'll be paying less when you do retire (because your fund will be a little bit smaller).



alaskaonline said:


> How is "modest" defined here and why are some people presuming that everyone with a pension fund in place has automatically a "huge fund".


That's the joy of percentages. If you have a small fund, you pay a tiny amount. If you have a large or huge fund, you pay a modest amount. It's 0.6% folks - less than what the cheapest annual management fees charge.


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## T McGibney

Niall M said:


> Can i ask a question, why do they need to fund this new scheme, surely if they reduce the vat, ets, they expect more people to stay in hotels, more people to eat out, thus bringing in more vat (at the lower rate) to mkae up the difference?



Because
(1) we all know at the bottom of our hearts that VAT cuts aren't self-financing in a recession era. That's why the UK VAT cuts were reversed.

(2) the govt is going to fritter away the remainder of the additional revenue on useless 'internship' programmes that will only line the pockets of the IBEC/ICTU dinosaurs.


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## T McGibney

Complainer said:


> If you want to spin pension tax relief as a 'defereral', then I'm going spin this levy as simply an advance tax payment - you're just paying a little bit of the tax now (when the State needs it badly) and you'll be paying less when you do retire (because your fund will be a little bit smaller).



Rather bizarre logic there.  Bank robbers will soon be defending themselves on the basis that their thefts are actually helping the banks cut their tax bills.


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## DerKaiser

alaskaonline said:


> Now you can all jump at me and tell me I got it all wrong


 
Your principles are spot on.

The point I would make, though, is that whilst it is good for the state to encourage individuals such as yourself saing for retirement you have to acknowledge that your final savings pot has been considerably enhanced through tax relief and that the levy is taking back a fraction of this.  You will still have done considerably better out of the tax regime than someone who did not put away anything from a pension.

Don't get me wrong though, if you put money away @ 18 to retire at 65, and if this levy continues, it will have reduced that money by 25%. A significant amount.

On the other hand, if you start putting money away 20 years before retirement, the levy will claw back 6% of your total contributions over the period.

Doing the maths (ignoring interest for simplicity), if you put away €100 p.a. for 20 years it will result in a total fund of €2,000. The cumulative levy charges will reduce this to €1,874 compared to the €1,180 you will have paid in net of tax (if you were on the higher rate). You have still gained 59% before taking investment returns (or management charges) into account.

If you take 25% of the €1,874 as a tax free lump sum you'd need to be taxed at 50% on the entire amount of the pension in retirement to not have gained from the tax regime. 

In summary, even with this levy, even if it were permenent, people will still be massively incentivised to save for retirement through a pension.


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## alaskaonline

Complainer said:


> That's the joy of percentages. If you have a small fund, you pay a tiny amount. If you have a large or huge fund, you pay a modest amount. It's 0.6% folks - less than what the cheapest annual management fees charge.



sorry Complainer but it's a bit of a mockery here. 
0.6% to some is more than to others. If someone on 100k a year has an equal to their salary pension fund they're still better off than someone just above the minimum wage with a minimum pension. Common!

I wonder - are the government jobs seen as public sector ones and they're spared this beautiful levy?


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## DerKaiser

Chris said:


> What disgusts me most about this tax is the point already made, that it simply is clawing back some of the tax relief enjoyed by those paying in, when in fact people are simply deferring the tax payment until the time when they retire and withdraw funds.


 
People have no business putting money into a pension if they are going to be taxed at the higher rate in retirement. They are not tax deferral vehicle to the rich, they are an incentive to those with enough means to save for retirement.

You can earn up to about €40k p.a. in retirement without paying the higher rate of tax. This would be achieved with the annuity proceeds from a pension pot of about €750k plus the OAP. In this situation the tax regime is very favourable.

Society has no business incentivising putting away more, and if you are whinging about not benefitting from the tax regime on pensions because you are paying higher rate tax in retirement then the answer is to stop paying into your pension and invest your money separately. Society has no interest in facilitating tax deferrals for the wealthy.

The sad thing is that people can no longer see the social value of private pension provisions because of their misuse ion the past as tax deferral vehicles.  If a €1m cap and an elimination of the tax free lump sum was introduced we would start to see the genuine value of pensions incentives.


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## foxylady

roker said:


> Quote:
> The following groups remain unscathed:
> 
> Public sector pensioners
> Old age pensioners
> Semis state workers and pensioners
> 
> Wrong, Old age pensions are paying USC on their private pension


 

Public sector already got hit with pension levy


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## Baracuda

foxylady said:


> Public sector already got hit with pension levy


Funding for a similar pension in the private sector would cost about 30%+ of salary for salaries over 60,000 and the pensions levy imposed was about 9 or 10% and yes I know that PS/CS was already contributing up to 4% before the levy was brought in, so this arguement does not wash when you compare both contribution rates. However all that being said the PS/CS that have AVC will have to pay the pensions levy on their funds as well.


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## Protocol

Baracuda said:


> yes I know that PS/CS was already contributing up to 4% before the levy was brought in


 

6.5% is the normal public service pension cont rate.


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## bluemac

36 now... and every year i decide to start my pension.. and there's been a good reason each year not to... yet again another one..


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## Chris

Complainer said:


> This seems most strange, coming from the guy who wants the Govt to stay out of everything. Everything except subsidising the pensions of middle and upper classes it seems.


I can see how you would think that, and just to clarify I do not belive the government should stay out of everything but rather that government should stay out of almost everything. Since they do meddle in pretty much all aspects of life, including an unfunded pension promise which will be increasingly difficult to fund in the future, then it is a good thing for government to incentivise people to fund their own pensions. 
The tax incentives of private pension contributions are not a subsidy, as the government do not pay towards the funds. What simply happens is that people are allowed to keep what is rightfully their property; you cannot say that letting people keep what is theirs is a subsidy. A directed incentive yes, but no government money goes towards paying for it, so it is not a subsidy.



Complainer said:


> If you want to spin pension tax relief as a 'defereral', then I'm going spin this levy as simply an advance tax payment - you're just paying a little bit of the tax now (when the State needs it badly) and you'll be paying less when you do retire (because your fund will be a little bit smaller).


You could only spin it that way if the levy were deducted from your tax liability upon exit. To say that the government is doing my future tax bill a favour is like me telling my employer to pay me less so that I don't pay as much tax.


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## ajapale

foxylady said:


> Public sector already got hit with pension levy


No, it was the public *service* that was hit by the public service pension levy: large chunks of the public *sector* (eg ESB and commercial semi state bodies with funded db pension schemes) were *not* hit by the public service "so called" pension levy.


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## Duke of Marmalade

Just listened to Henda on RTE. Justifying why ARFs will be exempt he said: "These APRs (sic) do not earn tax free growth so they should not bear the levy." 

Moderators please feel free to move this to LOS for, believe me, I can barely see the screen through the vapour I am emitting.


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## Complainer

Chris said:


> I can see how you would think that, and just to clarify I do not belive the government should stay out of everything but rather that government should stay out of almost everything. Since they do meddle in pretty much all aspects of life, including an unfunded pension promise which will be increasingly difficult to fund in the future, then it is a good thing for government to incentivise people to fund their own pensions.


So let me paraphrase that for you. When the Govt uses its resources to make you and other middle/higher earners better off, then the Govt is great. When the Govt uses its resources to make low or no earners better off, the Govt is terrible. It's all clear to me now.



Chris said:


> The tax incentives of private pension contributions are not a subsidy, as the government do not pay towards the funds. What simply happens is that people are allowed to keep what is rightfully their property; you cannot say that letting people keep what is theirs is a subsidy. A directed incentive yes, but no government money goes towards paying for it, so it is not a subsidy.


Tax relief is tax foregone. Tax is legally the property of the Govt. If you don't like it, move to another country (though I'm not quite sure that you'll find one to meet your taxing requirements) or lobby to get the law changed. Tax is legally the property of the Govt, and by allowing people to put tax-free money into pensions, the Govt is foregoing large amounts of tax. It is now taking just a little bit of that subsidy back.



Chris said:


> You could only spin it that way if the levy were deducted from your tax liability upon exit. To say that the government is doing my future tax bill a favour is like me telling my employer to pay me less so that I don't pay as much tax.



No - it's not like that at all, because the Govt and the employer are two different parties. If (as you claim) pensions are a tax deferral, then this is just taking the tax a little bit early. It would have gone to the Govt anyway, wouldn't it? [Unless of course, there is something that you're not telling us].


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## Duke of Marmalade

RTE news did a piece on ARFs. They followed the Henda line. People with ARFs, they claimed, pay more tax than the levy. This is an absolute rubbish point. Pensioners of DB schems or indeed recipients of annuities pay the exact same tax on their income as ARFers. That's not the point. An ARF is an alternative to a pension, there is absolutely no grounds whatever that ARFs should be spared the levy.


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## boaber

Duke of Marmalade said:


> An ARF is an alternative to a pension, there is absolutely no grounds whatever that ARFs should be spared the levy.



An ARF is not an alternative to a pension policy.  

The investment of an ARF comes from a pension policy, i.e. it's a post retirement policy, the same way as an annuity is.  

ARF holders have to take an income of 5% per annum, and pay tax, USC & PRSI on this income.  Even if they don't take an income, Revenue will assume they have and tax them anyway.


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## Gekko

Duke of Marmalade said:


> RTE news did a piece on ARFs. They followed the Henda line. People with ARFs, they claimed, pay more tax than the levy. This is an absolute rubbish point. Pensioners of DB schems or indeed recipients of annuities pay the exact same tax on their income as ARFers. That's not the point. An ARF is an alternative to a pension, there is absolutely no grounds whatever that ARFs should be spared the levy.


 
My understanding is that an ARF is not a pension. For example, in a bankruptcy scenario an individual's creditors can go after his ARF. If an ARF isn't a pension, why should it be subject to a "pension levy"?

I'm not an apologist for those with ARFs...it's just a question of logic.


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## JoeRoberts

I heard R Bruton on the radio today defending exemption of ARF's on the basis that they pay tax at 5% per annum on the fund value.

He didn't seem to understand that tax is paid at marginal rate on 5%.
This was the previous Finance spokeperson for Fine Geal.

Jack O'Connor was also very hazy when he was talking about the whole pensions area on the same show.


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## pconsidine

I'm not in favour of this tax, but some of these postings display an amazing sense of irony. Fact is that the fund-managers and advisors who are screaming about the unfairness of this levy charged far more than 0.6% for the "management" and advice that resulted in losses to the same funds many orders of magnitude greater than what is now proposed. Shane Ross has it perfectly right. The incompetents who lost our money, not their victims, should be made to pay this tax.

Some genius even feigned concern that this levy would discourage ordinary people from saving! That horse fled the stables long ago. Ordinary people have been fleeing the products being flogged by this failed industry, and not because of tax. they are opaque, wildly over-priced, risky, and incapable of assuring a predictable value at the chosen time of retirement. Most of all, they are just plain bad-value. The only reason they survive is that the enormous tax-payer subsidy disguises the losses and high charges. Their only function for middle-income people is tax-minimization rather than providing for retirement. Ther are irrelevant to people of modest means. With the economy in its present straights, the exchequer can't afford to subsidize this codology.

A modest proposal. We should allow everyone to nominate an ordinary deposit account which would be designated for their pension. Once designated, payments into this account up to a set threshold would be dirt-free. The income invested (to the current maximums) would be tax-exempt. Each financial institution would be required, once the account is designated to apply an interest rate and charges not less than those applying to the best rate and lowest charges currently on offer in respect of any of their term deposit accounts. Nothing to manage or administer (more than any other deposit account). No fees and charges. No unpredictability. No crashes. probably a better net return than the disasterous products currently on offer. Any takers? What about the credit-unions?


----------



## Gekko

Your suggestion is a sensible one.  Individuals can already do this with deposit based pensions, but the mechanism you've outlined would be far more accessible and transparent.


----------



## lionstour

TheFatMan said:


> I have a good well paid job and a good standard of living.
> But I was frugal, I put as much as I possibly could aside into my pension for fear that the state wouldn't be able to provide for me when I reach retirement. I could have taken the money invested in pension and bought bulgarian property with it but I didnt.


 
And availed of huge tax benefits from the state .  My heart bleeds for you.


----------



## browtal

I wish you were correct, I think Old Age Pensions are not exempt - any pension above the State pension I think is liable.
Browtal


----------



## boaber

pconsidine said:


> We should allow everyone to nominate an ordinary deposit account which would be designated for their pension. Once designated, payments into this account up to a set threshold would be dirt-free. The income invested (to the current maximums) would be tax-exempt. Each financial institution would be required, once the account is designated to apply an interest rate and charges not less than those applying to the best rate and lowest charges currently on offer in respect of any of their term deposit accounts. Nothing to manage or administer (more than any other deposit account). No fees and charges. No unpredictability. No crashes. probably a better net return than the disasterous products currently on offer. Any takers? What about the credit-unions?



Don't forget though to take inflation into account.  In real terms your proposal would result in very poor returns.


----------



## boaber

browtal said:


> I wish you were correct, I think Old Age Pensions are not exempt - any pension above the State pension I think is liable.
> Browtal



It's just the pension fund that is going to be levied. Any pension already in payment (annuity) is not being levied


----------



## DerKaiser

pconsidine said:


> We should allow everyone to nominate an ordinary deposit account which would be designated for their pension. Once designated, payments into this account up to a set threshold would be dirt-free. The income invested (to the current maximums) would be tax-exempt. Each financial institution would be required, once the account is designated to apply an interest rate and charges not less than those applying to the best rate and lowest charges currently on offer in respect of any of their term deposit accounts. Nothing to manage or administer (more than any other deposit account). No fees and charges. No unpredictability. No crashes. probably a better net return than the disasterous products currently on offer. Any takers? What about the credit-unions?


 
I think your heart is in the right place on this but there are four strong points I'd like to make:

1) There is the conundrum that when you are saving for up to 40 years for retirement, deposit account returns may not be appropriate as you are running the risk of your returns being seriously eroded by inflation.  Over long time periods you need some form of investment that will not be eroded by inflation. This means investment linked bonds or equities and unfortunately means short term volatility is inevitable. The likes of Shane Ross knows this but is happy to throw stones from the sidelines during the inevitable periods of poor returns, labelling the whole industry inept because global equity markets perform badly.  This is very cynical and not helpful to a better understanding of optimal long term investment decisions.

2) The pensions industry is one of the most competitive industries we have. Irish Life, Bank of Ireland, Aviva and Zurich are in the midst of a price war.  Customers have been consistenttly getting more competitive terms over the last 4 years to the point that Aviva does not even make a margin on new business these days. They are all engaging in cost saving exercises as the market will not tolerate anything other than competitive pricing.

3) The pensions industry is one of the most regulated and safe industries we have. If you invest money it is ringfenced and invested appropriately e.g. if you invest your pension in a cash fund, your money is set aside in cash. The regulatory oversight involves much prudence. There is irony in your suggestion that bank deposits would be a better option for people's pensions. If you hadn't noticed, the banks require tens of billions of state aid just to honour the money they owe to depositors due to insolvency and over a hundred billion more in ECB liquidity due to poor cash flow matching.

4) Let's say the pension providers had made tidy profits in the past.  Who is the main beneficiray of this now?  The state. Irish Life and Bank Of Ireland Life will probably contribute €2.5bn towards offsetting banking losses in the next couple of years.

So you and Shane Ross can stand on ye're soap boxes ridiculing the industry all you like for whatever personal reasons you may have, but I don't think you are being fair in who you call inept.


----------



## Duke of Marmalade

boaber said:


> An ARF is not an alternative to a pension policy.
> 
> The investment of an ARF comes from a pension policy, i.e. it's a post retirement policy, the same way as an annuity is.
> 
> ARF holders have to take an income of 5% per annum, and pay tax, USC & PRSI on this income. Even if they don't take an income, Revenue will assume they have and tax them anyway.


An ARF is an alternative to a pension, believe me, I was offered that alternative when I retired. Regrettably I took the pension. The 5% per annum is a complete red herring. People who take a pension instead of an ARF are also "forced" to take an income from their fund i.e. their pension. They also pay income tax and USC on this income.
*THERE IS ABSOLUTELY NO DIFFERENCE.*
Of course if someone is foolish enough to refuse their 5% income then they will pay the tax anyway but this was merely a device to force them to take the income. Nobody, but nobody is refusing their 5% income.

It is beyond belief that RTE, Richard Bruton and others do not understand this.

I agree that technically ARFs are not called "pension" funds, they are called "retirement" funds. So because the announcement only mentioned pension funds we are told that retirement funds are not in scope. Please pinch me for I can't believe this nonsense.

BTW I am aware of an ARF worth over €70M (this was in the public domain) and there are quite a few of these. Remember this is an ARF for one person. It is to be exempt because it is not technically a pension fund, it is a retirement fund. But I'll tell you what it really is, it is inheritance planning, so mega inheritance planning is to be exempt whilst Jack O'Connor's ordinary working man is to be in scope. Next time I'm voting Sinn Fein.

Sorry for rant. Please feel free to transfer to LOS.


----------



## Chris

Complainer said:


> So let me paraphrase that for you. When the Govt uses its resources to make you and other middle/higher earners better off, then the Govt is great. When the Govt uses its resources to make low or no earners better off, the Govt is terrible. It's all clear to me now.


First of all government does not have its own resources it only has what it takes from the economy. Secondly the government is not using its resources when it allows people to keep their own property, nothing is being given to someone paying into a pension. When government "helps" people through direct payments it does so by taking money from one group of people and giving it to another. There is a fundamental difference in allowing people to keep what is theirs and giving to people something that is not theirs.



Complainer said:


> Tax relief is tax foregone. Tax is legally the property of the Govt. If you don't like it, move to another country (though I'm not quite sure that you'll find one to meet your taxing requirements) or lobby to get the law changed. Tax is legally the property of the Govt, and by allowing people to put tax-free money into pensions, the Govt is foregoing large amounts of tax. It is now taking just a little bit of that subsidy back.


I fundamentally disagree with you. What people earn, in whatever way that may be, is their private property. The only organisation that can legally take some of the private property away is the government. By your argument 100% of GDP is government property, and only by the grace of government are we allowed to keep some of that by having less than 100% taxation. But that is of course a ludicrous suggestion. Uninterfered private property rights are one of the most important reasons why the western world managed to get itself out of the constraints of serfdom and mercantilism and prosper in the way it did. 



Complainer said:


> No - it's not like that at all, because the Govt and the employer are two different parties. If (as you claim) pensions are a tax deferral, then this is just taking the tax a little bit early. It would have gone to the Govt anyway, wouldn't it? [Unless of course, there is something that you're not telling us].


Your suggestion would make sense if upon exit the percentage of tax were reduced. What you are also not accounting for is the loss in compound gains on the 2.4% taken out of the pension pot. Assuming a pension pot of €100,000 and 25 years to retirement, the levy will take out €2400. A modest return of 6% per year will mean €10000 less in pension value after 25 years. The government is not just reducing wealth by the small sounding 0.6%.



pconsidine said:


> I'm not in favour of this tax, but some of these postings display an amazing sense of irony. Fact is that the fund-managers and advisors who are screaming about the unfairness of this levy charged far more than 0.6% for the "management" and advice that resulted in losses to the same funds many orders of magnitude greater than what is now proposed. Shane Ross has it perfectly right. The incompetents who lost our money, not their victims, should be made to pay this tax.


Regardless of how good or bad fund managers have done, they are providing a direct service on a product that people are free to sign up for. The government levy on the other hand is not voluntary and the government do nothing to add to the value of the fund.
The fact that many funds are down and that that somehow reflects badly on the managers in general is not a good way to judge performance. A fund's performance should always be looked at in relation to an index. A stock fund could be down 30%, but if the stock index is down 40% then the fund manager did a good job.
Any extra charges levied on fund managers will simply be passed on to customers.



pconsidine said:


> Some genius even feigned concern that this levy would discourage ordinary people from saving! That horse fled the stables long ago. Ordinary people have been fleeing the products being flogged by this failed industry, and not because of tax. they are opaque, wildly over-priced, risky, and incapable of assuring a predictable value at the chosen time of retirement. Most of all, they are just plain bad-value. The only reason they survive is that the enormous tax-payer subsidy disguises the losses and high charges. Their only function for middle-income people is tax-minimization rather than providing for retirement. Ther are irrelevant to people of modest means. With the economy in its present straights, the exchequer can't afford to subsidize this codology.


If you want predictable value for your pension investments you can always choose a cash or bond fund. The level of risk of individual funds is usually very clear and people can choose what level of risk they want to take. I also disagree that private pensions are generally bad value. Yes, some providers charge you on payments going in and then a management fee, but there are brokers that will void those charges.
As already stated, no money is being handed over from government to the pension investor so it is not a subsidy. Could you also clarify how you come to the conclusion that a private pension is not a form of "providing for retirement"?



pconsidine said:


> A modest proposal. We should allow everyone to nominate an ordinary deposit account which would be designated for their pension. Once designated, payments into this account up to a set threshold would be dirt-free. The income invested (to the current maximums) would be tax-exempt. Each financial institution would be required, once the account is designated to apply an interest rate and charges not less than those applying to the best rate and lowest charges currently on offer in respect of any of their term deposit accounts. Nothing to manage or administer (more than any other deposit account). No fees and charges. No unpredictability. No crashes. probably a better net return than the disasterous products currently on offer. Any takers? What about the credit-unions?


You can already do this by allocating pension contributions into a cash fund.


----------



## Baracuda

Protocol said:


> 6.5% is the normal public service pension cont rate.


Actual contribution's are 1.5% of gross salary, 3.5% of net pensionable income for employees hired after April 95, however their salaries are increases by  20/19 to compensate them because employees hired pre 95 there is no explicit contributions except for 1.5% of salary for spouses and childrens scheme. So we were both wrong


----------



## orka

DerKaiser said:


> You can earn up to about €40k p.a. in retirement without paying the higher rate of tax. This would be achieved with the annuity proceeds from a pension pot of about €750k plus the OAP. In this situation the tax regime is very favourable.
> 
> Society has no business incentivising putting away more, and if you are whinging about not benefitting from the tax regime on pensions because you are paying higher rate tax in retirement then the answer is to stop paying into your pension and invest your money separately. Society has no interest in facilitating tax deferrals for the wealthy.


I am personally in favour of removing all tax reliefs and incentives on pension benefits - which would by extension mean the imposition of BIK on employer contributions (actual and notional).  Failing that, I think the numbers DerKaiser gives above could be used as a framework for maximums limits/benefits.  Tax relief stops when a fund reaches 750K (index-linked); and employer incentives/reliefs won't apply for pension provision exceeding 40K.  So if someone is earning 150K, their employer can provide whatever pension they want but funding above 40K won't be tax-deductible for either employer or employee.


----------



## boaber

Duke of Marmalade said:


> An ARF is an alternative to a pension, believe me, I was offered that alternative when I retired. Regrettably I took the pension. The 5% per annum is a complete red herring. People who take a pension instead of an ARF are also "forced" to take an income from their fund i.e. their pension. They also pay income tax and USC on this income.
> *THERE IS ABSOLUTELY NO DIFFERENCE.*



Duke, so you agree that there is no difference between an ARF and a Pension *in payment *(Annuity)?  Annuities are not going to be subject to the levy, so why should ARFs?




> Of course if someone is foolish enough to refuse their 5% income then they will pay the tax anyway but this was merely a device to force them to take the income. Nobody*, but nobody is refusing their 5% income*.


 Not true, some ARF clients either just don't bother to take an income from their ARF (i.e forget to), or they choose specifically not to.  

To say that 100% of ARF policyholders don't take an income is incorrect.  Why then do QFMs make imputed distribution returns to Revenue every March (based on values at previous 31 December)?


----------



## Duke of Marmalade

boaber said:


> Duke, so you agree that there is no difference between an ARF and a Pension *in payment *(Annuity)? Annuities are not going to be subject to the levy, so why should ARFs?


Yes ARFs are equivalent to pension annuities are equivalent to DB pensions in payment. Yet it seems only the last of these (Jack O'Connor's working man) will be in scope whilst the two others (mainly the well healed) will be exempt.




> Not true, some ARF clients either just don't bother to take an income from their ARF (i.e forget to), or they choose specifically not to.
> 
> To say that 100% of ARF policyholders don't take an income is incorrect. Why then do QFMs make imputed distribution returns to Revenue every March (based on values at previous 31 December)?


Don't mean to offend but you are being silly here. ARF holders have a choice to take 5% and pay tax just like other pensioners or they may chose not to withdraw the 5% but still pay the tax. DB pensioners do not have that choice. If some ARF holders do chose to pay the tax but not make the withdrawal I presume that they reckon that this is a long term better strategy possibly as part of inheritance planning.

Can you at least admit that RTE and Richard Bruton have got this seriously wrong? I have no problem with you arguing for ARF exemption but please, please, not on the basis that they are more highly taxed than DB pensions in the first place.


----------



## DerKaiser

Duke of Marmalade said:


> Can you at least admit that RTE and Richard Bruton have got this seriously wrong? I have no problem with you arguing for ARF exemption but please, please, not on the basis that they are more highly taxed than DB pensions in the first place.


 
It sounds like they got mixed up with imputed distribution and deemed disposal! you have a point.

DB schemes are being put at a disadvantage in that they must pay on funds belonging to pensioners, but then again many DB schemes are underfunded and will benefit in this way relative to DC schemes.

It's going to be a hard call for a trustee as to whether they can get the employers to take a hit (probably not) and how the members will pay for it - you could theoretically exempt the pensions in payment and layer it on to the employee contributions or reduce the accrued benefits of non-pensioners.

To be honest, the active pensioners on DB schemes benefit from some pretty serious advantages aside from this in terms of being immune to investment conditions and far up the pecking order for underfunded schemes.

By the way, DC annuitants are not necessarily a well off cohort relative to DB pensionsers. And, at the end of they day, you do have the option to buy out an annuity.


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## Bronte

This is way too complicated. How did anyone dream up something that cannot be easily calculated or understood. One does wonder how the best brains in the government and the Dept of Finance have put this together and managed to make what seems like an absolute shambles which has everyone up in arms. The administration of it alone looks like a lot of effort in time and therefore money. 

Wouldn't it just be easier to raise more money, taxes, as we certainly need to, by just increasing the tax rates. Say a new tax band of 1% for everyone earning over a certain amount. 

How much is this new pension levy supposed to raise and just put it on income tax for those that can afford to pay it.

Duke can I ask you a question to try and understand your fury.  How much is the tax/levy actually going to be for you?  To get a better idea of how much this actually is for a pensioner.


----------



## Duke of Marmalade

_DerKaiser_  I agree that this is going to be hugely problematic for Trustees.

1)  If they lop it off pensions in payment only that will be patently unfair as they will be paying for the active members' share.

1)  If they lop it off pensions in payment only but at a straight 0.6% p.a. that will still be more than their actual share, if the fund is in deficit.  On the other hand it won't be enough because it will not pay for the levy on the active members' accrued benefits.

2) If they do not touch any benefits and the fund simply goes into more deficit then I agree that the preferential treatment of pensioners on a potential future wind-up would leave active members even more disadvantaged if that scenario came to pass.  Seems to me the legislation should provide that on subsequent wind-up pensioners entitlements could be reduced by any effect of levies taken in the past.

3)  It seems that the closest to a fair treatment is to lop it off all accrued benefits and benefits in payment in proportion to their actuarial liability.  Could be pretty messy.


----------



## Firefly

I think it's quite clever. They getting their hands on a pot of money that people can't access now anyway (unless you cash-in their pension and suffer a big loss)...it is not a direct grab as would be felt by tapping deposits. I don't agree with it at all btw. One more reason not to invest in a pension...


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## boaber

Duke of Marmalade said:


> Don't mean to offend but you are being silly here. (


 How am I being silly?  You said that "Nobody, but nobody is refusing their 5% income" - I was just stating that this is not the case.


----------



## Duke of Marmalade

boaber said:


> How am I being silly? You said that "Nobody, but nobody is refusing their 5% income" - I was just stating that this is not the case.


The issue is whether ARFs deserve to be exempted because they are inherently higher taxed in the first place.  Whether or not some ARFers choose not to withdraw the 5% is irrelevant.


----------



## browtal

Hi Boaber,
Many thanks for clarifying that for me, I am greately relieved. Thanks again Browtal


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## Protocol

Baracuda said:


> Actual contribution's are 1.5% of gross salary, 3.5% of net pensionable income for employees hired after April 95, however their salaries are increases by 20/19 to compensate them because employees hired pre 95 there is no explicit contributions except for 1.5% of salary for spouses and childrens scheme. So we were both wrong


 
Be careful.

For many public servants, they have always paid 6.5% of wages, and still pay 6.5% plus new levy.

CIVIL SERVANTS only - they paid just the 1.5%.

Post-95 civil servants now pay full-rate PRSI, and pay the full 6.5%, but got the salary uplift to compensate.
Bear in mind that there are approx 30-35,000 civil servants, but 250,000+ public servants.


----------



## z107

I keep reading that this new pension tax is temporary.
http://www.breakingnews.ie/ireland/pension-levy-modest-says-tanaiste-505110.html

Does that mean people get their money back after four years?


----------



## minion

Ive been talking to several people over the weekend in good jobs, where they should be secure or at least if they did need to could get another job very easily.

What did they have in common.  They have pension funds and healthy savings.  They were talking about emigrating, not to find a job, but to protect their savings from future seizure by Noonan and co.  Also they are looking into moving their pension funds abroad.  It might be too late for the 0.6% levy, but at least they can protect against future swoops.  At this stage they are even willing to leave their pensions here if they have to, but to get out anyway to protect future savings.

I think Noonan has just started the run to end all runs.  Watch this develop over the next few months.


----------



## Complainer

Chris said:


> First of all government does not have its own resources it only has what it takes from the economy.


Not quite true - the Govt certainly has its own assets (land, buildings) and some of these generate their own Revenue. But regardless, the Govt is legally entitled to levy tax. That is a fundamental tenet of our system of Govt and every civilisation for hundreds of years.



Chris said:


> Secondly the government is not using its resources when it allows people to keep their own property, nothing is being given to someone paying into a pension. When government "helps" people through direct payments it does so by taking money from one group of people and giving it to another. There is a fundamental difference in allowing people to keep what is theirs and giving to people something that is not theirs.


When the Govt gives a tax break to those who pay into their pension, it is helping those people who can afford to pay into their pension. 



Chris said:


> I fundamentally disagree with you. What people earn, in whatever way that may be, is their private property. The only organisation that can legally take some of the private property away is the government. By your argument 100% of GDP is government property, and only by the grace of government are we allowed to keep some of that by having less than 100% taxation. But that is of course a ludicrous suggestion.


Indeed, it is a ludicrous suggestion, and it is not near my suggestion at all. In pension terms, it is 99.4% away from my suggestion, to be precise.



Chris said:


> Uninterfered private property rights are one of the most important reasons why the western world managed to get itself out of the constraints of serfdom and mercantilism and prosper in the way it did.


Strange how you forget to mention Govt-provided healthcare, Govt-provided education, Govt-provided legal infrastructure, Govt-provided transport infrastructure etc etc as important reasons why the western world managed to get itself out of the constraints of serfdom and mercantilism and prosper in the way that it did-  could there possibly be a bit of blinkered view going on here?



Chris said:


> Your suggestion would make sense if upon exit the percentage of tax were reduced.


My suggestion makes as much sense as your suggestion that pension tax relief is a 'deferral'.



Chris said:


> What you are also not accounting for is the loss in compound gains on the 2.4% taken out of the pension pot. Assuming a pension pot of €100,000 and 25 years to retirement, the levy will take out €2400. A modest return of 6% per year will mean €10000 less in pension value after 25 years. The government is not just reducing wealth by the small sounding 0.6%.


WOuld you like to rerun the numbers to show the benefit of the substantial tax relief provided when contributing to the pension, just for context?


----------



## orka

Complainer said:


> Indeed, it is a ludicrous suggestion, and it is not near my suggestion at all. In pension terms, it is 99.4% away from my suggestion, to be precise.


You want people to make pension contributions and then have the government take 100% of the assets leaving the person with zero? I thought you just wanted to do away with tax relief? Which I would agree with; but I don't think you'll find much support for 'here - have some tax relief on your contributions to incentivise you to invest and then we'll swipe the lot'...


----------



## Duke of Marmalade

Just listened to the Week in Politics on RTE.  Richard Bruton stated that ARFs have already had their levy increased from 1.2% to 2%.  What he means is that people have been forced to increase their pension from their ARFs from 3% to 5% and so, if they are paying tax at 41%, that is an increase in tax from 1.2% to 2%.  But DB pensioners pay this exact same tax.  I really cannot believe that after several days Richard Bruton is persisting with this utter nonsense.  Okay Fine Gael are the Fat Cats' party so maybe that's the reason but Labour have bought into this as well.


----------



## Complainer

orka said:


> You want people to make pension contributions and then have the government take 100% of the assets leaving the person with zero?


I've no idea where you got that from what I posted. Just in the interests of clarity, I do NOT want people to make pension contributions and then have the government take 100% of the assets leaving the person with zero. My point was that Chris's strawman arguement (100% tax) is 99.4% away from the current measure (0.6%) tax. So he is 99.4% wrong.

If he wants to make this an arguement about the principal of taxation, then why doesn't he talk about Govt taking 100% of income or taking 100% of a property or taking 100% of a unit linked fund. The only principal here is that Govt can tax pension assets. It already taxes other assets, such as the NPPPR tax on 2nd properties.


----------



## Chris

Complainer said:


> Not quite true - the Govt certainly has its own assets (land, buildings) and some of these generate their own Revenue. But regardless, the Govt is legally entitled to levy tax. That is a fundamental tenet of our system of Govt and every civilisation for hundreds of years.


I can't find the Examiner article from last year where they showed a breakdown of state income. If I am not mistaken over 90% of state income came from taxation, which means that the actual income producing assets are quite minuscule, but I take your point.
And you are right that taxation is part of government, my disagreement is in the ridiculous levels of taxation that a lot of the western world now has.



Complainer said:


> When the Govt gives a tax break to those who pay into their pension, it is helping those people who can afford to pay into their pension.


I agree, but that makes it an incentive not a subsidy.



Complainer said:


> Indeed, it is a ludicrous suggestion, and it is not near my suggestion at all. In pension terms, it is 99.4% away from my suggestion, to be precise.


Just to clarify, I was referring to your statement that "Tax relief is tax foregone. Tax is legally the property of the Govt." This says to me that any amount of an income or asset that is not taxed away is essentially "given" to the owner of the income or asset, or in other words government has "property rights" over all income, but allows people to keep some.



Complainer said:


> Strange how you forget to mention Govt-provided healthcare, Govt-provided education, Govt-provided legal infrastructure, Govt-provided transport infrastructure etc etc as important reasons why the western world managed to get itself out of the constraints of serfdom and mercantilism and prosper in the way that it did-  could there possibly be a bit of blinkered view going on here?


Health care, education and transport were all taken on by government a very long time after serfdom and mercantilism. The industrial revolution, starting around 1775, marked the beginning of western prosperity; the services you mention were not monopolised by governments until 150 years later, and had nothing to do with western prosperity.



Complainer said:


> My suggestion makes as much sense as your suggestion that pension tax relief is a 'deferral'.


Actually it doesn't. You are arguing that because the government will take 0.6% now I will pay less in tax when I retire because the total capital is lower. But I am still worse off. If however, I was given a reduction in tax upon exit, then it would balance out.



Complainer said:


> WOuld you like to rerun the numbers to show the benefit of the substantial tax relief provided when contributing to the pension, just for context?


The number would be substantially larger, but I don't see the point of your argument. People are using their private property to invest in their future financial needs through capital appreciation.


----------



## pconsidine

I will address each of your four points:

1. Sure, deposit a/cs are eroded by inflation. The value of all pension funds is similarly eroded. However, the "managed" funds are also eroded by fees, charges, and the bad decisions of our brilliant fund-managers. The only justification of the managed funds is that their performance not only pays for the extra costs, but also pays a sufficient premium to compensate for their disadvantages in the form of risk and uncertainty. For most of the medium and recent past they haven't even come near. Moreover, there is no reason whatsoever to believe that the paradigm that "in the long term equities will always come out ahead" will ever be re-established.

2. This is self-serving nonsense. The evidence is that the pensions industry neither competes nor is competitive. Like sheep, they all followed the same disasterous investment strategies. Their high charges (levied even if they lose their client's money) smacks more of rent than reward for achievment.

3. With respect, more self-serving, evidence-lite, nonsense. Losing 30% of their client's funds isn't my idea of "safe". The only "safe" and dependable things in the pensions industry are the fees and charges. My IPBS deposit a/c was guarranrteed and safe. A huge chunk of my Irish Life pension was lost by the fund-managers. There was no guarrantee for the latter.

4. Seriously! The primary purpose of pensions is to provide support and security for the owner of the pension. It is NOT to make a "tidy profit" for the industry, or tax for the State. In any case, the sum recovered by the taxpayer through the sale of Irish Life will only be a small part of the tax forgone by the State in creating whatever wealth resides in Irish Life. If this is your best argument to justify this failed industry, it is time we stopped subsidizing its bad-value, obsolete products and started to look elsewhere towards simpler, transparent products which will not be eroded by  unjustifiable fees and charges - levied as rent by advisors who cannot either beat the market, nor the returns on simple deposits. Give us the deposit-account option I posited, and lets see how middle-income people "vote" with their money.


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## Complainer

Chris said:


> Actually it doesn't. You are arguing that because the government will take 0.6% now I will pay less in tax when I retire because the total capital is lower. But I am still worse off.


Indeed, you are still worse off after the levy. Just as you are still way better off from the tax relief that you got on the way in, but somehow seems to have been magically forgotten.



DerKaiser said:


> 2) The pensions industry is one of the most competitive industries we have. Irish Life, Bank of Ireland, Aviva and Zurich are in the midst of a price war.  Customers have been consistenttly getting more competitive terms over the last 4 years to the point that Aviva does not even make a margin on new business these days. They are all engaging in cost saving exercises as the market will not tolerate anything other than competitive pricing.


Are there any articles or reports that would support this? I'm not close to the market offerings these days, so it would be helpful to see some verification of this.


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## DerKaiser

pconsidine said:


> I will address each of your four points:



For clarity, the above appears to be a response to 22 posts ago



pconsidine said:


> there is no reason whatsoever to believe that the paradigm that "in the long term equities will always come out ahead" will ever be re-established.



You're right, there is no guarantee as to which asset class will do better over the longer term.  It's just that equities are more likely to vary in line with the cost of living over longer terms making them more appropriate for long term investment.




pconsidine said:


> The evidence is that the pensions industry neither competes nor is competitive. Like sheep, they all followed the same disasterous investment strategies. Their high charges (levied even if they lose their client's money) smacks more of rent than reward for achievment.



You're right in one respect, charges are levied on funds under management rather than on investment gains. 

There is a reward for achievement/penalty for failure though.  If I have €1bn of funds under management and charge 1% that's €10m in revenues.  Say costs are €8m, profit will be €2m.  If fund returns are -25%, revenues drop to €7.5m so a loss would be made on the same costs.

As for following the same strategies, there are significant differences in 10 and 20 year returns across the industry. Besides, you don't have to opt for a managed fund from Irish fund managers - there's a whole spectrum of fund choices if you fancy a cash fund, a gold fund, a managed fund from international fund managers, etc.



pconsidine said:


> A huge chunk of my Irish Life pension was lost by the fund-managers. There was no guarrantee for the latter.



Presume this was 2008?  Funds are up about 35% since then, making up pretty much all of that loss.

Anyway, if you are invested in equities you take the short term volatility.  No one will cover the losses you make on your equity investment. It's not a one way bet where you pat yourself on the back when the returns are good are seek to have someone else to blame and cover your losses when returns are bad.

The point I made about the regulations making the pension industry safe was that the proceeds of your investment (whatever they turn out to be) are ringfenced unlike deposits in our banks.



pconsidine said:


> The primary purpose of pensions is to provide support and security for the owner of the pension. It is NOT to make a "tidy profit" for the industry, or tax for the State. In any case, the sum recovered by the taxpayer through the sale of Irish Life will only be a small part of the tax forgone by the State in creating whatever wealth resides in Irish Life.



You seem to be confused as to what goes on.

You take out a pension to provide security for retirement.

The state provides you (not the pension provider) with the tax subsidy to encourage sensible retirement provision. 

You choose a pension provider and an investment choice.

The pension provider provides a range of services in exchange for fees.

You are responsible for the type of investment choice you make and you are responsible for choosing the most competitive pension provider in terms of fees.

This reminds me of an old thread:
http://www.askaboutmoney.com/showthread.php?t=109889


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## DerKaiser

Complainer said:


> Are there any articles or reports that would support this? I'm not close to the market offerings these days, so it would be helpful to see some verification of this.



[broken link removed]
You can see that Aviva's margin on 2010 new business is £1m in 2010 down from £12m in 2009 and £15m in 2008.

This a pitiful return on the capital invested - They'd be multiples better off putting their capital on deposit! 

This is the best sign of the competitiveness/lack of profitability in the industry at the moment.


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## Complainer

DerKaiser said:


> [broken link removed]
> You can see that Aviva's margin on 2010 new business is £1m in 2010 down from £12m in 2009 and £15m in 2008.



Any chance of a more specific link, or telling me which page/category/line you are referring to? All I can see is "Improved life new business IRR to 12.5% and payback to 8 years (FY 2009: 10.0% and 14 years) "


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## DerKaiser

Complainer said:


> Any chance of a more specific link, or telling me which page/category/line you are referring to? All I can see is "Improved life new business IRR to 12.5% and payback to 8 years (FY 2009: 10.0% and 14 years) "


If you go into the MCEV supplement you'll see Aviva Ireland's new business result in the regional splits


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## Chris

It generally helps if you quote the post you are referring to. Anyway, I think DerKaiser has already answered most of your points, but I do want to make one more.



pconsidine said:


> Give us the deposit-account option I posited, and lets see how middle-income people "vote" with their money.



Don't you think that if so many people wanted a low risk investment for their retirement funds they would be flocking into cash funds? People are already voting that they overwhelmingly do not want to be in cash for their retirement savings.


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## Complainer

DerKaiser said:


> If you go into the MCEV supplement you'll see Aviva Ireland's new business result in the regional splits


What business does this refer to? Pensions? Investments? Motor? Home?


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## DerKaiser

Complainer said:


> What business does this refer to? Pensions? Investments? Motor? Home?


 Life and pensions  -  pensions by far the bigger driver


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## Complainer

DerKaiser said:


> Life and pensions  -  pensions by far the bigger driver


Thanks for clarifications, though I'm not sure that it fully validates your comments about the competitiveness of the industry. I'm wondering if Aviva had any exceptional costs that year, such as redundancy or major IT investments which can skew the figures?

I'd really love to see some broader analysis - does anyone survey or report on fees and charges, in the same way that the report on fund performance?


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## DerKaiser

Complainer said:


> Thanks for clarifications, though I'm not sure that it fully validates your comments about the competitiveness of the industry. I'm wondering if Aviva had any exceptional costs that year, such as redundancy or major IT investments which can skew the figures?
> 
> I'd really love to see some broader analysis - does anyone survey or report on fees and charges, in the same way that the report on fund performance?


 
New Business profitability will always exclude one-off costs, though poor margins could simply be an indication of too high an underlying cost base. I can't imagine their underlying cost base has moved upwards recently, but sales have declined and they clearly haven't been in a position to maintain profitability leaving cost cuts as the only real option - thus indicating a decent level of competition in the market.

It would be useful for someone to do a survey for pensions.

It's quite easy to compare annuity and term assurance rates (and comparisons regularly appear in the Best Buys and Make Me Richer sections of the sunday papers).

By law a schedule of the impact of charges and commissions is provided with all quotations to potential customers, so this could be used as a basis for a survey.

Anecdotally it has to be acknowledged margins in the UK are more cut throat and competitive than here, whilst continental european policyholders generally suffer from massively higher charges.


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