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Budget 2014: Government U-turn on pensions levy
The Minister for Finance, Michael Noonan, appears to have backtracked on the commitment made in last years’ Budget when he announced that the Pensions Levy will not be renewed after 2014. Taxand Ireland discusses the proposed new Pension Levy.
While the Minister has maintained his stance to remove the current 0.6% levy on pension funds at the end of 2014, he has disappointingly introduced a new levy of 0.15% on private pension funds in 2014 and 2015.
The planned changes will mean that private pension schemes will pay both the 0.6% levy and the 0.15% levy in 2014 (a combined 0.75% levy) and the 0.15% levy in 2015.
The levy will take an estimated €650 million out of pension savings in 2014 and another €135 million in 2015.
The Minister has said that this new levy of 0.15% is designed to fund the continuing jobs initiative and to make provision for potential State liabilities which may emerge from pre-existing or future pension fund difficulties. However if the intention behind this new 0.15% levy is to fund defined benefit pension scheme deficits of insolvent companies, such as the Waterford Crystal pension scheme, it is difficult to see the levy ceasing in 2015.
Also published in Thomson Reuters' Taxnet Pro, 7 November 2013
Like the existing levy, the new levy will determinately affect all private pension schemes, at a time when many schemes are underfunded and have recently agreed cuts to benefits and increases to contributions. A further concern is the equity of a levy that effectively penalises defined contribution scheme members in order to fund historic deficits in defined benefit schemes.