IRELAND - Ireland's Tánaiste - the country's deputy prime minister - has dismissed claims the pensions levy is causing "severe hardship", insisting that asset management companies administering pension assets are more than able to absorb the 0.6% tax introduced in May.

Speaking during leader's questions in the Dáil yesterday, Eamon Gilmore defended the levy, saying it was "considerably less" than the fees charged of pension funds for asset management.

Éamon Ó Cuív, deputy leader of opposition party Fianna Fáil, challenged Gilmore to offer to repay funds taken from pensioners under what he regarded as "false pretences".

The demand comes after it was revealed that, of the €460m raised to date through the levy, €200m had yet to be spent on a number of promised stimulus measures, including the abolition of air travel tax.

Opposition finance spokesman Michael McGrath insisted the income was being used to improve the exchequer's balance sheet, rather than to assist with job creation measures, while Ó Cuív highlighted that the country's Pensions Board, as well as departments for social protection and finance, had all resisted the new tax.

Defending the levy, Gilmore said: "The government, as part of its jobs initiative, introduced a temporary levy on pensions of 0.6%, which is considerably less than the amount many companies are charging in administration costs."

He further argued: "The companies in question are perfectly capable of absorbing the levy."

Fianna Fáil's deputy leader - who branded the levy a "stealth tax" - pressed further about the €200m underspend, but received no direct answer.

He was instead told that all funds raised would be used "for job creation measures in the four-year profile of the jobs initiative".

The pensions levy has proven controversial, with members of the government, including minister for social protection Joan Burton, openly opposing its introduction. It has also led to Irish Life & Permanent reporting a loss for the first six months of the year.

The Irish Association of Pension Funds has repeatedly come out against it, calculating that the pension industry had this year alone contributed €850m in new income to the exchequer and that further proposed changes to tax relief risked "tipping the while system over".