Irish Pension Levy
You know a government has reached the point where it’s time to have a good rummage down the back of the sofa for cash when it starts confiscating pension fund money from people sensible enough to have started to accrue it like they were told to.
The Pensions Fund Levy of 0.6% has been in place for a couple of years now and is set to continue for at least another couple. It has, as obviously expected had an adverse effect on pension savers in Ireland who thought that Pensions were the one haven safe from Tax. Many even thought this was kind of the point of them.
However, parking all the potential additional future horrors (the likelihood that it will roll on after four years, or, even worse, the chances it will increase etc) for the moment, and acknowledging that The Minister for Finance has targeted €470m as the figure to be raised from this enterprise, let’s focus on what has happened in the two years and where that leaves people right now.
The Bill that was passed basically imposed an annual Stamp Duty ("Levy") of 0.6% per annum on the market value of pension scheme assets and applies for a four year period up to and including 2014. There are no Government “plans” to extend the Levy past 2014, however this is not the same as a guarantee that they will not do this.
So in crude terms, if in 2000 you had a pension scheme worth €600,000, you would have already paid two levies of €3,600. Depending on how your fund performs from here on in until (at least 2014) you can look forward to paying similar, but in all likelihood, increasing amounts.
That in itself might strike some as a bit of kick in the teeth for savers, but the cost, annoyance and grief doesn’t end there. Pension Scheme Members will also need to obtain a market value of their scheme assets on 30th June 2012, 2013 and 2014. This is easy enough for those whose funds are invested in cash or in Insured Funds through a Life Office (or similar), but what if your Pension Scheme owns property or properties? You’ll be required to pay for an independent open market valuation every year, on every single asset. That could get very pricey.
Sadly (but not that surprisingly), the exemptions were few. To be have been excluded from this levy, you needed to be in one of the following schemes:
- Approved Retirement Funds (ARFs)
- Approved Minimum Retirement Funds (AMRFs)
- PRSAs (where a tax free lump sum has been drawn)
- public sector schemes and schemes where employees have exercised their employment outside the State.
There were rumours at the time of the publication of the Bill that tax relief on pension contributions would also be reduced in 2012.
Admittedly nothing has happened on that front as yet, but the subject was confirmed to be part of the Comprehensive Review of Expenditure being undertaken by the Minister for Public Expenditure and Reform.
In fact, the reduction of tax relief on pension contributions was part of Ireland’s “bail out” agreement with the European Union, European Central Bank and International Monetary Fund so it stands to reason that it’s still on the cards.
It’s not the prettiest picture for Pension Scheme members in Ireland but it doesn’t have to be a situation that leaves investors and their funds trapped with no option but to take it on the chin.
If this situation affects you or your clients, give us a call; we might just have a solution that rebuilds some of those walls around your fund that are being knocked down by the cash starved government.
“It has been important to me and Jean to have things set out in plain understandable terms, this you have always done for us. We consider the way you are handling things for us to be first class and we look forward to your further help in the future.”
Peter Clarkson, Modular Scaffolding and Building Equipment Limited
PSG Aspire SIPP
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