ESRI recommending cutting tax relief on pensions to 20%

[Brendan Burgess]

https://www.independent.ie/business...-cut-could-save-1bn-a-year-esri-36940724.html

This makes no sense at all. Why would anyone contribute to a pension to get 20% tax relief if there were a significant chance that the pension would be taxed at 40% when they retire?

I have no problem with putting a maximum size on pension funds e.g. €800k or even scrapping the tax-free lump sum on retirement.

And if the relief were cut to 20%, how would you treat employers' contributions?

Say, I am earning €50k and my employer is contributing €5k to my pension.
I would be better off reducing my salary to €45k and getting an employer's contribution of €10k.

And what about defined benefit schemes? How would they be taxed?

Even floating a nonsense proposal like this is dangerous. It could cause people to lose confidence in pensions and reduce their contributions. On the other hand, it might cause people to make excessive contributions while the higher tax relief is available.

Brendan

 

[thos]

It does seem contradictory. I would have thought if the govt want to get rid of the state pension, then they need a more active push for people to invest in their own pensions, so this would work against this.
Unless the 1bn was used to fund the state pension, and provide a bit more certainty about it's future and what level it could be expected at.

 

[Steven Barrett]

https://www.independent.ie/business...-cut-could-save-1bn-a-year-esri-36940724.html

This makes no sense at all. Why would anyone contribute to a pension to get 20% tax relief if there were a significant chance that the pension would be taxed at 40% when they retire?

I have no problem with putting a maximum size on pension funds e.g. €800k or even scrapping the tax-free lump sum on retirement.

And if the relief were cut to 20%, how would you treat employers' contributions?

Say, I am earning €50k and my employer is contributing €5k to my pension.
I would be better off reducing my salary to €45k and getting an employer's contribution of €10k.

And what about defined benefit schemes? How would they be taxed?

Even floating a nonsense proposal like this is dangerous. It could cause people to lose confidence in pensions and reduce their contributions. On the other hand, it might cause people to make excessive contributions while the higher tax relief is available.

Brendan

That's a massive issue with regards to tax relief. Company owners rarely make personal contributions, why would they if they can just make company contributions and there is scope for huge contributions at that. If they run a pension scheme for their staff, they usually have a minimum personal contribution for their employees.

Then there's the public servants. I heard the Pension Deduction is being made permanent in January 2019, so public servants will always be paying a higher contribution to their pension. With tax relief reduced to 20%, it could really hurt these people financially.

The levels of tax that we pay in this country is crazy already. Can the government not manage with what they have already? Giving them more income when they can't manage what they have is a bad idea. Never mind the strain it will put on future generations when there are so many people who stopped their pension due to the cost of it.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[sjapok]

https://www.independent.ie/business...dle-earners-would-be-big-losers-37016481.html

"Thinktank?", there's absolutely no one in that organisation doing any thinking.

Yes, this might save a billion in 2018, but it will cost a massive multiple of this when the state realise pension contributions have fallen off a cliff and they have a massive demographic crisis on their hands, that their pay as you go state pension is no longer feasible given the proportion of people in retirement vs working and that individuals will be working until 80 to retire on a juicy 20k pension.

They actually need to do the exact opposite and incentivise people to save even more into a pension. You need massive contributions to develop into even a small pension at retirement as it is. Most don't understand this, and won't until it's too late.

 

[LDFerguson]

So let me see if I'm understanding this. Successive governments have been paying lip service to the idea of reforming the various forms of pension systems in this country for years. The Pensions Green Paper of 2007 - all 278 pages of it - mooted the auto-enrolment scheme as one possibility.

So the Government acknowledges that more people really do need to be putting money away towards their pensions. The State Pension is under increasing demographic pressure, the numbers of people making contributions towards any form of supplementary pension are far too low and so are the average levels of contributions being made. They go to great lengths commissioning reports and forming committees to figure out ways of encouraging more people to save for their retirement years.

Then Paschal Donohoe makes suggestions that maybe the Government will make it LESS attractive for people to contribute towards pensions.

Genius.

 

[Gordon Gekko]

This needs to be taken on as a cause.

Under no circumstances should the government be allowed to cut tax relief on pensions.