Article covered in Sunday Times yesterday....................
Our TDs and Senators have passed into law a section in the Finance Bill designed to artificially understate the value of their pension funds and senior civil service pension funds so that they avoid or minimise tax that would otherwise be payable.
For top civil servants, Ministers and TDs have, The value of a pension for tax purposes is in theory worked out be estimating what sum you would need to invest to generate an annual payment equal to that pension. If the end result is above €2.3 million, the pension is liable to tax at the top rate.
What they have done is very clever. They ditched the idea of actuarily working out the capitalised value and instead decided to apply an artificially low multiplier of 20 to the yearly pension figure. The multiplier should, according to actuaries, be closer to 40 in order to give a realistic valuation. By reckoning the capital value of their individual pension funds in this creative manner, most if not all of these bright hard working servants of the people manage to fall below the €2.3 million threshold and so avoid exposure to top rate income tax.
If my sums are right, this means they can take a pension up to around €110,000 and still not pay top rate tax.
Brady (Sunday Times) quotes the Department of Finance as crediting the Revenue with the idea, supposedly to keep things simple.
It is simple all right. Very simple.
Roy
Our TDs and Senators have passed into law a section in the Finance Bill designed to artificially understate the value of their pension funds and senior civil service pension funds so that they avoid or minimise tax that would otherwise be payable.
For top civil servants, Ministers and TDs have, The value of a pension for tax purposes is in theory worked out be estimating what sum you would need to invest to generate an annual payment equal to that pension. If the end result is above €2.3 million, the pension is liable to tax at the top rate.
What they have done is very clever. They ditched the idea of actuarily working out the capitalised value and instead decided to apply an artificially low multiplier of 20 to the yearly pension figure. The multiplier should, according to actuaries, be closer to 40 in order to give a realistic valuation. By reckoning the capital value of their individual pension funds in this creative manner, most if not all of these bright hard working servants of the people manage to fall below the €2.3 million threshold and so avoid exposure to top rate income tax.
If my sums are right, this means they can take a pension up to around €110,000 and still not pay top rate tax.
Brady (Sunday Times) quotes the Department of Finance as crediting the Revenue with the idea, supposedly to keep things simple.
It is simple all right. Very simple.
Roy