The Irish government is unlikely to gain support for its reforms to the second-pillar pension system unless it abolishes the 0.15% pensions levy, the Irish Association of Pension Funds (IAPF) has suggested.
In a submission to the Department of Finance ahead of next month’s Budget, the association noted that more than €2bn had been taken from private sector pension funds since the introduction of the 0.6% levy in 2011, with a second, 0.15% levy introduced last year.
To date the newer levy, ostensibly meant to pre-fund the state’s liability with company insolvencies requiring cash injections into underfunded schemes, had yet to be specifically earmarked for such payments, the IAPF said.
“In any case, it is completely inequitable to ask those with defined contribution retirement savings to make a contribution to State liabilities in defined benefit schemes,” the submission added.
Jerry Moriarty, chief executive of the IAPF, also noted the exemption for the unfunded public pension schemes, which enjoy a greater level of protection with state-backing.
The consultation also questioned the government’s ability to roll out a new compulsory or semi-compulsory supplementary scheme, highlighted by minister for Social Protection Joan Burton as a way of increasing second-pillar coverage, as long as the current levy remains in place.
It added: “It will be extremely difficult to persuade people of the benefits of pension savings if the government does not discontinue the levy. People need to know their savings are secure.
“The experience of the levy and the fate of the National Pensions Reserve Fund do not indicate that pension savings in Ireland are secure.”
The association also urged the government to set up a working group of government and industry representatives to discuss how the pension system’s tax and regulatory arrangements could be simplified.
It said the “many anomalies” currently in place needed to be addressed.
Asked whether the proposed Pensions Council, the body soon set to advise the Department of Social Protection on regulatory issues, could take on some of these tasks, Moriarty said he was uncertain.
Because the membership of the council has yet to be announced, Moriarty said he was unsure whether it should be seen as part of its role.
“If it had the appropriate people, yes, but sitting down really needs to happen,” he said.
“The system already has lots of anomalies, different benefit limits that apply depending on if you’re in a PRSA, an occupational scheme or a personal pension plan.
“If we are going to add another layer to it, we really need to sort out any anomalies there at the beginning, rather than complicate it further.”