Irish government accused of using pension assets to boost exchequer
IRELAND - The Irish government has been accused of using the pensions levy as a means of improving the exchequer's balance sheet, rather than investing its income into the jobs initiative and other stimulus measures as initially proposed.
Opposition finance spokesperson Michael McGrath - a member of Fianna Fáil - made the accusation as a new survey by the Irish Association of Pension Funds (IAPF) found schemes were paying the levy from members' funds, with sponsoring companies unable to assist financially.
Attacking the Labour government's policies, McGrath estimated that, of the €461m in income from the pension levy made by the end of September, only €255m had been spent on employment stimulus measures - with other changes, such as the abolition of air travel tax, not yet implemented.
The Fianna Fáil TD therefore argued that the pension levy - a four-year, 0.6% charge on pension assets introduced in May - was being used to improve the appearance of exchequer income figures "by over €200m" this year alone.
"It is now clear the government is using the pension levy to put a more positive gloss on tax revenue figures for 2011 by not spending all the money raised on the jobs initiative," he added.
Meanwhile, a new survey by the IAPF found that schemes were being forced to reduce member benefits to pay for the pension levy, as assets were being drawn from members' funds, as sponsoring companies were unable to pay on its behalf.
The umbrella organisation noted that some pension funds had cut benefits by 10%, with the effect likely to last for many years.
Jerry Moriarty, director of policy at the IAPF, was critical of the tax and the attached jobs initiative, telling IPE: "The jobs initiative was very vague in terms of what it was going to deliver. It never said how many jobs were going to be delivered and the breakdown of where the money was going to be spent."
He explained that the levy was hitting members' confidence in pension schemes and that - combined with volatile markets and falling income - it was "making a difficult situation worse".
Moriarty calculated that, combined with the levy and a number of changes to pension tax relief, the industry had contributed €850m to the exchequer this year alone.
He also warned that any future charges risked "tipping the whole system over".
"In considering Budget 2012, the government needs to take into account the significant contribution it has taken from the pension sector this year, the negative impact this is having on pension savings and the long-term consequences of this," he said.
Consultancy Aon Hewitt earlier this year revealed that Ireland's managed pension funds had fallen 2.1% in September, with an over 9% decrease since January.
Denis Lyons, senior investment consultant in the firm's Dublin office, said: "Many defined pension schemes will have seen their funding levels suffer as they face the dual problems of declining assets and rising liabilities."