ISME preparing case over SFT for private pensions being unfair

I don't really understand this story. A few very high-earning public service workers are hit by the SFT. The article says the following which is just plain wrong:

Public pensions are not subject to a ‘standard fund threshold’ because they are paid out of public money, rather than individuals’ pension savings.
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Although the a quote from the DoF further down the story corrects this.

I don't really understand the public/private distinction either. The distinction is DB/DC. Notional values are calculated for people on private DC schemes as well as PS ones.
 
I’m in the same boat. It’s a shambles of a story. The multiplier was changed from 20 to 30. There is an SFT. The public servants can defer any chargeable excess tax and pay it over 20 years but that seems reasonable given that there isn’t a ball of money there to pay it upfront. My own sense is that these guys are eejits as it’s more likely to shine a light on the fact that there is a €2m threshold and put that under more threat than win some grand concession for private sector employees.
 
The mission of ISME, the independent organisation for the Irish Small & Medium business sector, is to:
  • To represent the best of what is best in the SME sector
  • To anticipate and decisively articulate the needs of the sector
  • To be vigilant, decisive, and direct in defending the interests of all small and medium businesses
  • To be beholden to no interests, other than the members
  • To ensure that what is urgent does not detract from what is important to the members
  • To help Members better manage their business through the provision of accurate, timely and pertinent information
  • To drive down members costs through the co-ordinated strength of the sector
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Very hard to see where this issue fits in to that list of priorities.

Also seems a bit tone deaf to be raising press over this when so many small businesses are struggling with other much more important issues like C19 or competing with MNCs for talent, and also while people are voting in their droves for anti-wealth parties like SF. :rolleyes:
 
Good point. Lots of businesses are on their knees; this is the last issue they should be highlighting right now.
 
This really is a bizarre development.

As others have said, private and public sector DB pensions are treated exactly the same as regards the application of the SFT. There is no disparity of treatment here.

Proprietary directors can already use pension vehicles to convert company assets into substantial personal wealth in an extremely tax efficient manner. Sole traders and professionals that are not permitted to incorporate their businesses can only look on with envy.

The €2m SFT is very generous when compared to the £1.03m (€1.12m) lifetime allowance that applies in the UK.

Frankly, this proposed action (which looks destined to fail) is raw greed.
 
Sarenco said:
As others have said, private and public sector DB pensions are treated exactly the same as regards the application of the SFT. There is no disparity of treatment here.
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You can quibble with the choice of multiplier and maybe it could be set more transparently.

But otherwise the policy is clear and Revenue make a fair attempt to apply it equally to DC and DB pension holders.

I can't see where the High Court is going to find holes here.
 
The Irish SME Association (ISME) is raising funds for a legal challenge to force the creation of a fair system for private sector pension savers. By way of crowdfunding, ISME intends to raise a fund which will challenge tax discrimination against private sector workers before the High Court.

Workers in the private sector who aspire to a pension even close to that enjoyed by a public sector worker earning the same salary, would have to surrender more than a third of their salary. Even if they could afford it, our taxation rules constrain them from doing so. Our taxation system permits only third division pensions for the private sector, meaning most PAYE workers will have only the contributory old age pension of €248 per week to live on in retirement.

As part of the Court action in pursuit of fair treatment for private sector workers, they will pursue three objectives:

  1. Tax relief for private sector pension savers must be maintained at the current marginal rate of taxation (currently 40%).
  2. Private sector workers must not be discriminated against via the “income ceiling” on contributions. i.e. the Private sector ceiling (currently 115,000) should not be lower than that of the highest earning public sector worker (currently €350,000).
  3. Many public sector pensioners enjoy pensions that would require a fund far in excess of the current €2m “standard fund threshold” (SFT) even though they do not have to fund their pension. Yet higher-earning private sector workers are financially penalised if they save more than €2m of their own money for their pension. This blatant discrimination must end, and the SFT must be increased to its 2005 level of €5m.

You can watch their very informative video on their Gofundme page here

www.gofundme.com

Donate to Pensions Equity Challenge, organized by Neil McDonnell

The Irish SME Association (ISME) is raising funds for a legal challenge to force the creati… Neil McDonnell needs your support for Pensions Equity Challenge
www.gofundme.com www.gofundme.com

Or here on Youtube
www.youtube.com

ISME's Pension Equity Q&A with Vincent Wall, Eamonn Kielty & Neil McDonnell

ISME's Pension Equity Q&A with Vincent Wall, Eamonn Kielty & Neil McDonnell on 10th Februrary 2022.
www.youtube.com www.youtube.com
 
The current maximum contributory old age pension is €253.30 which the majority of public sector workers do not receive in addition to their occupational pension as the OAP is integrated into their pension.
 
AJAM said:
Workers in the private sector who aspire to a pension even close to that enjoyed by a public sector worker earning the same salary, would have to surrender more than a third of their salary.
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I am not sure of the accuracy of this statement. Take an example used in another thread of a public sector worker retiring after 40 years service as a clerical officer. Their pension amount on a final salary of €40,000 approx is €19,000. If you take away the contributory state pension amount (for which their PRSI contributions alone would allow them to qualify if they were in the private sector) then they have a pension of €6,500pa. Would it require a 30% salary contribution of a private sector worker on a similar salary over 40 years to fund this amount? The single PS pension scheme in place for new entrants since 2013 is even less generous. This is an example of a low paid worker but the vast majority of the PS are low to middle income workers. It is also misleading to say that PS workers don't have to fund their pension. It is true that there is no pension fund but pension contributions are quite significant when you compare take home pay in both sectors. Some higher PS earners are often quoted for the millions they accrue in pension entitlements but most ordinary PS workers have modest pensions on retirement. I understand that pre 95 PS workers had a better deal but anyone who joined the PS in the last 27 years doesn't enjoy the same benefits.
 
I cannot see this case getting anywhere.
1. Tax relief on member contributions is the same in the Public and Private Sectors.
2. The earnings ceiling for tax relief on member contributions is the same in both.
3. Public sector employees contribute to their pension, like most private sector employees. The €2m fund cap applies to both categories also. To exceed the €2m valuation, would require a pension of c€80,000 (plus the retirement lump sum). That equates to a salary of c€160,000. I suspect the vast majority of Public servants earn well less than €160,000. Even for the few that exceed the €2m cap, they still have to pay an excess of fund tax.

So cannot see their case.
 
Conan said:
I cannot see this case getting anywhere.
1. Tax relief on member contributions is the same in the Public and Private Sectors.
2. The earnings ceiling for tax relief on member contributions is the same in both.
3. Public sector employees contribute to their pension, like most private sector employees. The €2m fund cap applies to both categories also. To exceed the €2m valuation, would require a pension of c€80,000 (plus the retirement lump sum). That equates to a salary of c€160,000. I suspect the vast majority of Public servants earn well less than €160,000. Even for the few that exceed the €2m cap, they still have to pay an excess of fund tax.

So cannot see their case.
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Also, the courts are normally very slow to tie the hands of the executive in routine bureaucratic matters like setting and maintaining tax reliefs.
 
Conan said:
3. Public sector employees contribute to their pension, like most private sector employees. The €2m fund cap applies to both categories also. To exceed the €2m valuation, would require a pension of c€80,000 (plus the retirement lump sum). That equates to a salary of c€160,000. I suspect the vast majority of Public servants earn well less than €160,000. Even for the few that exceed the €2m cap, they still have to pay an excess of fund tax.
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Overall I agree with posts above that this case is pointless.

There is perhaps an argument to be made that Revenue's capitalisation factor of 20 for a DB pension (including Public Sector superannuation) is unrealistic. Using an annuity rate that a private sector person would need to buy themselves a similar annuity to the public service would probably cost them more like 37 x pension. So the small number of people with DB pensions of around €55,000 per year or more are probably exceeding the €2 million SFT. But that would apply to anyone in a private sector DB scheme either.

Overall I think that this case is a waste of money and court time and will only help to foster a feeling of "us and them" between the private sector and public sector, based on highly dubious assertions.
 
AJAM said:
  1. Tax relief for private sector pension savers must be maintained at the current marginal rate of taxation (currently 40%).
  2. Private sector workers must not be discriminated against via the “income ceiling” on contributions. i.e. the Private sector ceiling (currently 115,000) should not be lower than that of the highest earning public sector worker (currently €350,000).
  3. Many public sector pensioners enjoy pensions that would require a fund far in excess of the current €2m “standard fund threshold” (SFT) even though they do not have to fund their pension. Yet higher-earning private sector workers are financially penalised if they save more than €2m of their own money for their pension. This blatant discrimination must end, and the SFT must be increased to its 2005 level of €5m.
Click to expand...

Seems a bit Irish, calling on PAYE workers to fund this campaign! (The average salary working for a ISME is far lower than the equivalent worker in the MNC?) If its successful, it would maintain the status quo for them but substantially benefit the very wealthy minority, which are most likely the business owners represented by ISME? Notably, the substantial advantages available to Directors seem to be sufficient.

AJAM said:
You can watch their very informative video on their Gofundme page here

Or here on Youtube
www.youtube.com

ISME's Pension Equity Q&A with Vincent Wall, Eamonn Kielty & Neil McDonnell

ISME's Pension Equity Q&A with Vincent Wall, Eamonn Kielty & Neil McDonnell on 10th Februrary 2022.
www.youtube.com www.youtube.com
Click to expand...

I didn't watch too much of that talk but 1) he described a PS Lump sum akin to an ex-gratia payment from the state because the pension wasn't funded, which didn't seem right and 2) seemed to misunderstand what ASC is and compared it with AVC. He seemed to be complaining that the ASC was not capped at the earnings limit of €115k, which I would have thought he would be in favour of?

The rationale for the case seems highly dubious but the technicalities probably have some merit to be fair.
 
This video is extremely poor and misleading.
It refers to “millionaire TD’s” by including the capital value of their Occupational Pension. This is completely misleading.
It suggests that the Retirement Lump Sum which Civil Servants get is some form of gratuity and does not reduce their pension. Again misleading, since the MAX benefit for such an individual is a lump sum of. 150% of salary plus a pension of 50%. In a private sector Defined Benefit scheme the equivalent might be a gross pension of 2/3rds and by surrendering part of that pension in return for a lump sum of 150% of salary, their reduced pension would be c50%. So very similar to the Public Service.
If ISME is complaining about some (not all) Public Servants having a Defined Benefit scheme compared to most Private Sector employees having a Defined Contribution Scheme, their is nothing to stop ISME members providing DB schemes for their employees. But I doubt that’s what they intend.
About the only point they have is the ability of Public Servants to spread any excess of fund tax over a 20 year period. But since their is no personal fund for available to the Public Servant, the only solution is to spread the excess charge by taking it out of the pension payment. Private sector employees have a fund, so they are in a position to pay any excess of fund tax at the time of retirement.
If this is the best case they can assemble, they will need the best/most expensive Barristers to make any half-plausible case. But I would give then close to a zero chance of victory. It seems more like a vanity project.
 
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