The Irish pensions industry has welcomed the end of the pensions levy, which minister for finance Michael Noonan has confirmed for next year.
During his 2015 Budget speech, Noonan confirmed that the four-year, 0.6% stamp duty introduced in 2011 would end as planned, and also said that he did not intend to continue a second pensions levy of 0.15% beyond 2015.
The second tax, introduced in last year’s budget, effectively increased the rate paid by pension funds this year to 0.75%, and was branded “outrageous” by the Irish Association of Pension Funds (IAPF) at the time.
The IAPF said that pension savers would be “relived” that Noonan confirmed the 0.6% tax would end as planned this year, with only the lower rate – ostensibly meant to pre-fund the Irish state’s liabilities when pension funds wind up in deficit after a company insolvency – continuing.
“While that will still take €135m from those savings, it is an improvement in the increase in the levy this year which has resulted in €700m taken from pension savings in 2014,” the association said in a statement.
Jerry Moriarty, the association’s chief executive, said that the industry was never going to retrieve the €2bn taken from it as part of the levy, but that the alternative “could have been a lot worse” – a reference to rumors ahead of the budget that there would be an indefinite extension of the 0.15% charge.
Joyce Brennan, partner with Mercer’s Irish practice also welcomed the news.
“We know from working with employers and employees that the extension of the levy proved a deterrent to pension provision – the reversal of this unfair and retrospective tax is a positive move.”
Consultancy LCP, meanwhile, said that the levy was an “unjust and inequitable tax on savings” and echoed Brennan’s view that it had acted as a disincentive to save into pension funds.
As part of the budget announcement, minister for public expenditure and reform Brendan Howlin said that the state would seek to adapt the “successful model” of public private partnerships (PPPs) that it had employed to build schools to attract further capital to the social housing sector.
The government has previously said that it would seek “significant” pension fund investment to grow the social housing sector, although it is understood that the relevant ministries have yet to consult with the domestic industry.
Howlin said he hoped the social housing PPPs would be able to attract €300m of funding from the private sector.