Disagree with the new pension levy
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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.
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.
alaskaonline
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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
Complainer
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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.
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).
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.
T McGibney
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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.
T McGibney
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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.
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.
alaskaonline
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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?
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.
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.
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.
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 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.
Duke of Marmalade
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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.
Moderators please feel free to move this to LOS for, believe me, I can barely see the screen through the vapour I am emitting.
Complainer
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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.
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.
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].
Duke of Marmalade
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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.