The Irish government has announced tax cuts on occupational pension schemes and a rise in the state pension in its 2002 budget. As a result, the tax charge on refunds of employee contributions will go down from 25% to 20%, in line with the standard tax rate.
Michael Kelly, associate director of KPMG’s pension and actuarial consulting division in Dublin believes that this lower tax environment will benefit people leaving jobs within five years, since they will pay less tax if they cash in their company pension plan at the same time.
However, Kelly points out that the impact will be short-lived as the pensions amendment bill will reduce the vesting limit from five to two years from next year. Additionally, Kelly notes the continuing support of the government for the national reserve fund. However, he notes that the decision by the government to keep the contribution level at 1% of GDP reflects its objective to persuade people to begin taking care of their own retirement provision.
In a separate move, the Irish Association of Pension Funds (IAPF) last monthorganised a special seminar of Irish pensions experts to discuss Irish problems on taxation and retirement provision.The meeting aimed to find ways in which the taxation of retirement provision arrangements in Ireland could be simplified.