How will the new 0.6% pension fund levy work?

Prima facie it looks like DB pensioners (i.e. those actually receiving a pension) will be hit but DC pensioners will escape (they either receive an annuity or have an ARF).

Is that fair?
 
Probably not - could the DB Pensioners get a transfer value and purchase an annuity from a 3rd party to avoid this tax?
 
The problem is that the levy hits the fund and not the pensioners. The Government have passed the buck by saying it is up to the Trustees and administrators to decide if they want to pass the levy on. Most funds won't have a choice.
 
Please keep this thread to discuss the mechanics of the levy. For qualitative discussion see: here.

Some posts moved.
 
In case anyone was looking for confirmation. ARF's are not covered by levy

[broken link removed]
 
Levy and AMRF

Does anyone know what the situation is regarding the new Levy and if this will apply to AMRF's as well as ARF's
 
Are PRBs affected by this ? Given that you cannot increase or decrease the value of it seems a bit unfair on large ones.
 
Pensioner of a DB scheme, being paid monthly from Fund (Not an Annuity)

Will this .06% levy really cost me (and possibly you) 20% of our current pension?

I have read the thread, listened to the radio, and read the papers. However, so far, I have heard very little discussion on the real impact on people who are currently receiving a pension direct from the DB fund.

Our Fund is well funded but the Trustees decided for the past few years to pay Pensions direct from the Fund in the hope that Annuity rates would improve and they would then buy an Annuity in the future.

My worrying reading of the situation is thus:

Pension 30,000 pa. (3% annual increase and attached Widows pension)
The cost of buying an Annuity to fund this pension (at present 3% rate) is 1,000.000.
The Levy on this is 6,000 pa.
30,000 less 6,000 = 24,000 pa..... a drop in income of 20%.

I believe it is easy enough for Trustees to calculate the value of each individual pensioners pot, and apply the levy in the manner above.

Most Trustees will feel that the remaining members (not yet retired) should not pay for us retired members.

Please tell me I,ve got this wrong, and cherr me up!
 
Would it not be (for first year anyway):

(€1,000,000 - €6,000) x 3% = €29,820?
 
Hi, boaber. I had not actually looked at the that way (I guess I panicked at the thought of 6,000 pa) What you say makes an awful lot more sense, and its not too bad at 180 pa.

You have cheered me up! Thanks
 
boaber,
I'm not so sure. The levy applies to the "market value of assets under management". This is different from the annual income. So if you have a DC scheme valued at €1,000,000, then the Levy is €6,000 each year. If you are a member of a DB scheme and in receipt of an annuity paid from the Fund (as opposed to where the annuity is secured with a Life Company), then it seems that the Fund is still liable for the 0.6% on the total value, including the capital that might be notionally allocated towards paying pensioners. So if the notional value of your pension was €1m, it seems that the Fund will not be able to distinguish between funds for pensioners and funds for those not yet retired. In that case, will the Trustees distribute the cost of the Levy over all members (pre-retired and retired)? If so, how?
It seems that the Dept of Finance have not taken into account DB schemes paying annuities out of the Fund and DB schemes who have offloaded the annuity risk to a Life Co. So potentially, pensioners in DB schemes who pay the annuity from the Fund could be penalised, whereas pensioners with stand-alone annuities would not be hit.
And pensioners in receipt of a pension under unfunded DB schemes (e.g. Civil Service) avoid the Levy entirely.
 
Agreed Conan. The Government have very kindly left it up to the Trustees/Insurers on how to deduct the levy, so I guess it will vary from scheme to scheme.
 
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