IRELAND - Mercer has warned the Irish government against proposals that will see the introduction of a pension levy, branding the move a “smash-and-grab” on retirement savings.
Under current proposals, pension funds would pay a levy of 0.5-0.6% per annum, raising around €2bn in funds over four years to fund job creation measures in the country.
However, the consultancy argued that job creation should not be prioritised at the expense of pension savings, according to senior consultant Aisling Kennedy.
“Given the budgetary pressures that Ireland faces in the future as a result of an ageing population, the government should be encouraging more pension saving, instead of a ‘smash-and-grab’ on the savings that individuals and their employers have already set aside for the future,” she said.
Kennedy added that the levy would also discourage further pension saving, as workers would be unwilling to put aside additional money if the government were able to access it at a time of their choosing.
Mercer also argued that it would only add to a number of difficulties facing pension schemes in Ireland, as they battle the effects of the financial crisis and increasing liabilities due to longevity.
The consultancy criticised the “arbitrary and unfair” nature of proposals that penalised employers who had been prudent and encouraged employee retirement savings.
“It’s Mercer considered opinion that the proposed levy is inequitable in a host of different ways”, Kennedy said, adding that employees facing retirement in the next few years would be hit harder by the levy than those still at the beginning of their work life.
The comments follow criticism from the Irish Association of Pension Funds, with the group’s director of policy Jerry Moriarty saying there had been “a fair bit of anger”, as it was believed that the proposals, announced during the recent elections in February, had been dropped.
“We thought the government would see sense - but they don’t seem to have engaged with anyone,” he told IPE.com last week.