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F&P slams talk of pensions contribution cap

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  • F&P slams talk of pensions contribution cap

DENMARK - Pensions and insurance industry association Forsikring &Pension has attacked proposals to place a cap on pension contributions, saying there is simply no reason to introduce one.

"The Danish pension system is sensible as it is," said deputy director Carsten Andersen, who further argued: "It is inappropriate to introduce a ceiling, which will hinder real pensions saving for many quite ordinary people.

The association explained putting a limit of DKK100,000 (€13,410) on annual contributions to pension schemes has been on the political agenda in the last few years.

The Danish government has charged a tax commission with finding ways to improve the country's tax system, and there have been suggestions, says Anne Seiersen, assistant director at F&P, this is one of the options they should consider.
The suggestion was also made by a trade union think-tank and the opposition Social Democrats in parliament, she added.

This suggested limit is supposed to prevent people from paying less tax by speculating in large pension savings, F&P said. But it has conducted an analysis which, officials say, concluded large pension contributions are not a tax dodge which give less money to state coffers.

"On the other hand, a cap on deductible pension contributions on a wide scale would hit the self-employed with irregular contributions and high earners with ordinary labour market pension schemes," it said.

The suggestion to introduce a cap on contributions is often justified with an argument claiming pensioners who move to Spain or France do not pay tax in Denmark, the association said.

But its report showed people who had made annual payments of more than DKK100,000 into their pension scheme have not moved to countries with lower taxes on pensions.

"It would be destructive for our pension system, if pensions were used as tax speculation so it is necessary to close loopholes," said Andersen.

"But that should not go as far as to hit those who are creating real economic security. The most effective thing is targeted changes to the tax agreements that the tax minister has already signed with France and Spain," he said.

Another argument being touted for imposing a limit on contributions is it could finance lower marginal taxes, the association said.

"A pensions ceiling could give extra money to the state in the short-term, but it would also mean less tax revenue from pensions in the longer-term. Therefore, a cap on pensions tax cannot be used to finance tax reductions," the report concluded.

In separate news elsewhere in Denmark, pension fund SamPension is signing up to the UN Global Compact - a set of generally accepted ethical principles which many businesses have pledged to align their operations to.

"By signing the principles, we are committing ourselves to continue to have good management, social and environmental behaviour in the investment process," said the fund, which already has clear investment guidelines on several ethical issues, notably on weapons manufacturers.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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