Pension fund levy has done its job
- Thread starter Brendan Burgess
- Start date
- Status
That's no longer good enough though. The whole pension proposition has been dependent on favourable tax treatment - without tax breaks on contributions, gross roll-up and the tax-free lump sum on exit, no-one would invest in a pension product - why would they? - money locked away for a long time with annual charges being deducted by companies that have not really covered themselves in glory in the past with high charges etc. (although I do accept that this is hugely improved).
What happens when the government needs money again, maybe when the demographics start to bite and the public sector and state pensions become increasingly unaffordable? The pension levy set the precedent that rules can be changed after the fact, impacting on a captive audience. "Let's reduce the tax free lump sum in half - or abolish it altogether - sure didn't you get great tax relief on the way in, we're just taking a bit of that back - and aren't you lucky to have any pension provision at all. "
On current terms, pensions are an attractive proposition for most people but I just wouldn't trust anymore that what I might expect to happen (or not) to my pension contributions WILL happen. As it is, there is no PRSI/USC relief on the way in but these have to be paid on the way out (although PRSI stops at 66). What if gross roll-up is stopped? What if another levy is applied? What if the tax-free lump sum is reduced/abolished? We can't say anymore that these things won't happen.
It's not that they are on DB pensions - they are unfunded public sector DB pensions. I have a private sector deferred DB pension and the trustees felt the scheme was not in a financial position to absorb the cost of the levy so all benefits will be permanently reduced in retirement by c. 2.5% - so I'll still be paying for this levy in 50 years time (hopefully I'll be alive...)
Gerry Canning
Registered User
- Messages
- 2,504
Orka,
Can,t disagree with your (fear) of what government may do.
You clearly show what happens when certainty is gone , and you are correct to doubt.
However , on anything else outside of pension (savings) what is to stop Government putting in their greedy little mitts?
They if need be, can change any rule, its just that we thought pensions were (safe).
I think pensions remain best of a bunch ?
Can,t disagree with your (fear) of what government may do.
You clearly show what happens when certainty is gone , and you are correct to doubt.
However , on anything else outside of pension (savings) what is to stop Government putting in their greedy little mitts?
They if need be, can change any rule, its just that we thought pensions were (safe).
I think pensions remain best of a bunch ?
Hello,
The fact that there is no guarantee that a future Government (be it a FG/Lab Government or other) won't go and dip back into our pensions again in the future, with us having absolutely no defence against what they might take, means I for one will be very slow to ever contribute to a pension fund again.
Tax deductions benefit the higher earners most, so thats an arguement with limited appeal to a sizeable part of our population - in reality, probably the part of our population who need to start saving for a pension most of all !
Let us also not forget, that while there may well be tax payable on pension payments when we retire and draw funds, there is nothing to compensate us for losses within our pensions, when investment losses occur.
A significant portion of the population of Ireland are relying on the Irish State pension, for their retirement. I read somewhere that the State pension equates to less than the minimum wage and there is little prospect of increase, given our country simply can't afford it. Yet, despite the Government and the population all being very much aware of this fact, the Government's action in recent years by taxing the private pension funds did nothing other than create a lack of trust and by extension, discourage future savings for retirement through private pensions.
Needless to say, the good Government of today, have very little interest in planning for tomorrow however... well, unless tomorrow happens to be election day !
Our pension arrangements in Ireland need a massive overhaul and they are neeed now...
* A specific pension reserve fund needs to be independently managed to help provide for the future State pension and must be completely out of reach and influence of any Government, so can it can not be used as a slush fund, anytime the Government needs cash for something.
* A specific part of everyones UPC / PRSI needs to be paid into the above pension reserve fund, from every single paycheck. No more of this ah, sure it's all going into the pot and don't worry about twenty years from now, lets just get re-elected and by the time the problems occur, we'll all be on nice politicans pensions etc. and it will be someone elses problem
* Significant reform is needed with regards to arrangements for State employees pensions. Historic arrangements need to be brought to an immediate end (even if this results in once off costs having to be incurred, by way of lump sums being placed in pension funds etc.) and all current or future State employees need to operate on the same basis as the private sector for pension purposes.
* Tax breaks need to be amended, to further incentivise people in the lower income brackets to start pensons and pay into them regularly - no matter how small the amount of their contributions. If anything I would argue that those on a lower wage be given more generous tax breaks, given they need the additional financial assistance more to help them to be able to save for their futures etc.
* Last, but probably the most important of all, there needs to be appropriate legal measures put in place to assure the population that absolutely no one can ever dip into their private pension funds again, regardless of the country's financial circumstances etc.
The fact that there is no guarantee that a future Government (be it a FG/Lab Government or other) won't go and dip back into our pensions again in the future, with us having absolutely no defence against what they might take, means I for one will be very slow to ever contribute to a pension fund again.
Tax deductions benefit the higher earners most, so thats an arguement with limited appeal to a sizeable part of our population - in reality, probably the part of our population who need to start saving for a pension most of all !
Let us also not forget, that while there may well be tax payable on pension payments when we retire and draw funds, there is nothing to compensate us for losses within our pensions, when investment losses occur.
A significant portion of the population of Ireland are relying on the Irish State pension, for their retirement. I read somewhere that the State pension equates to less than the minimum wage and there is little prospect of increase, given our country simply can't afford it. Yet, despite the Government and the population all being very much aware of this fact, the Government's action in recent years by taxing the private pension funds did nothing other than create a lack of trust and by extension, discourage future savings for retirement through private pensions.
Needless to say, the good Government of today, have very little interest in planning for tomorrow however... well, unless tomorrow happens to be election day !
Our pension arrangements in Ireland need a massive overhaul and they are neeed now...
* A specific pension reserve fund needs to be independently managed to help provide for the future State pension and must be completely out of reach and influence of any Government, so can it can not be used as a slush fund, anytime the Government needs cash for something.
* A specific part of everyones UPC / PRSI needs to be paid into the above pension reserve fund, from every single paycheck. No more of this ah, sure it's all going into the pot and don't worry about twenty years from now, lets just get re-elected and by the time the problems occur, we'll all be on nice politicans pensions etc. and it will be someone elses problem
* Significant reform is needed with regards to arrangements for State employees pensions. Historic arrangements need to be brought to an immediate end (even if this results in once off costs having to be incurred, by way of lump sums being placed in pension funds etc.) and all current or future State employees need to operate on the same basis as the private sector for pension purposes.
* Tax breaks need to be amended, to further incentivise people in the lower income brackets to start pensons and pay into them regularly - no matter how small the amount of their contributions. If anything I would argue that those on a lower wage be given more generous tax breaks, given they need the additional financial assistance more to help them to be able to save for their futures etc.
* Last, but probably the most important of all, there needs to be appropriate legal measures put in place to assure the population that absolutely no one can ever dip into their private pension funds again, regardless of the country's financial circumstances etc.
An increase to the OAP was announced in the most recent budget.
I agree with you that our country simply can't afford this in the long term but in the short term there's an election to be won!
Hello,
That did little more than push the problem out for a few years more into the future, if anything, to the cost of many middle aged working people in Ireland who have been paying into "the system" for perhaps twenty years or more, in the expectation of getting a pension from age 65.
As for the election, this is the time to really give the politicans a good kicking and make them earn their keep.... even if we only get a few months work out of them, before most get relected and get to swan around for another few years doing little good (in most cases).
It seems than the posters on this thread thinks that the Contributory OAP is charity which is funded by the over stretched hard working young tax payers which I don't believe to be the case.
I won't start a debate on this POV but I do think its strange.
Then please explain how it's funded - must be the magic money tree?
Gerry Canning
Registered User
- Messages
- 2,504
{the pension levy has done its job}
From the threads it surely has ensured that the poor uptake in people providing for their old age will increase !
Inflation.
It is funded by current tax receipts , not the brightest of systems !
Those who now get the pension , paid up to 70% tax in their working lives to support ,health/education/roads etc.and also to fund the pensiond they paid for as per monagt.
We have a long way to go to that 70%.
I would be optimistic , that we can tweek pensions to be fair to workers and pensioners.
From the threads it surely has ensured that the poor uptake in people providing for their old age will increase !
Inflation.
It is funded by current tax receipts , not the brightest of systems !
Those who now get the pension , paid up to 70% tax in their working lives to support ,health/education/roads etc.and also to fund the pensiond they paid for as per monagt.
We have a long way to go to that 70%.
I would be optimistic , that we can tweek pensions to be fair to workers and pensioners.
I think the clue is in "Contributory"
Just cause it says so on the tin doesn't make it so. Pensions are funded from current expenditure. The contributions made by retiree's (and also people working today) come nowhere near to covering the cost of their old age pension's so it is funded by current taxpayers in a kind of ponzi scheme that will eventually come to a grinding halt as outlined in the McKinsey report a few weeks ago (http://www.irishtimes.com/business/...ion-system-considered-unsustainable-1.2373517) and even the Department of Public Expenditure and Reform acknowledge this (http://igees.gov.ie/wp-content/uplo...and-Related-Supplementary-Benefit-Schemes.pdf). Failure to recognise this is head in the sand stuff.
Hello,
Just because people previously made "contributions" to the state pension scheme, does not mean that the State used those "contrbutions" to invest for their retirement.. hence the obligation on current and future taxpayers.
The system is badly flawed. It is not the fault of those who make the "contributions" (through PRSI or whatever the State like to call the contribution method from time to time) and they are right to want a pension back in return for having their money deducted - I feel the same way in respect of my own position.
However, the bottom line is the State has not put the funds aside and ring fenced them exclusively for use to pay future pension obligations, while the curent and future taxpayes cannot afford to keep funding the obligations into the future unless there is a minor miracle of some sort.
Just because people previously made "contributions" to the state pension scheme, does not mean that the State used those "contrbutions" to invest for their retirement.. hence the obligation on current and future taxpayers.
The system is badly flawed. It is not the fault of those who make the "contributions" (through PRSI or whatever the State like to call the contribution method from time to time) and they are right to want a pension back in return for having their money deducted - I feel the same way in respect of my own position.
However, the bottom line is the State has not put the funds aside and ring fenced them exclusively for use to pay future pension obligations, while the curent and future taxpayes cannot afford to keep funding the obligations into the future unless there is a minor miracle of some sort.
They are also the demographic that may need assisted living and/or care in the near future..........And, probably don't want to be a burden on their children or the state.
20 or so years away from retirement allows flexibility in preparing for that time with more options........save more/spend less/work abroad and I am not making light of the problems that young/middle aged workers have with financial commitments/ tax load/ children/ negative equity, etc......just trying to being a balance to the debate.
How many more reports are needed before Irish politicians get off their collective well fattened ani and do something about this?
Probable answer = loads.
State pension system unsustainable, report warns
http://www.irishtimes.com/business/econ ... -1.2470395
Probable answer = loads.
State pension system unsustainable, report warns
http://www.irishtimes.com/business/econ ... -1.2470395
There is no need for any of them to do anything for at least another ten to fifteen years and they all know it.... by which time it will be someone else’s problem (most likely, yours and mine !).
Don't discriminate, kick every politician you meet
- Status