Jobs Initiative announced - introduction of the Pension Levy

Last Tuesday (May 10^th) the government introduced the anticipated pensions levy as part of the Jobs Initiative. The government is imposing an annual levy of 0.6% on the value of the assets in private sector pension schemes. Approved Retirement Funds (ARFs) are excluded from this levy but are taxed in a different manner through the imputed distribution. Public Sector pensions are exempt.

The levy, which is to be backdated to January of this year, will be paid each year for four years and is expected to raise €470m a year, a total of €1.9 billion by the end of the 4 year period.

The levy has not been put into legislation as of yet but is expected in the coming days. We will keep you informed on any developments.

The Scales of Inequity

An Independent Trustee Company study reveals costs up to €35,000 a month to fund each Minister’s pension.

According to the report, whilst a self-employed entrepreneur has to toil for 40 years and generally make significant and often unaffordable monthly contributions to their pension funds, Ministers only have to serve 10 years in the role to achieve pensions worth up to €6,870,504.

The Scales of Inequity



Tommy Nielsen comments that “presently, a Minister who has served 10 years is entitled to a pension of 60% of his salary, which is applicable even if that Minister were to retire from his position at 50 years of age. For a private sector worker to deliver such a pension, they would need to build up a pension fund of €6,870,504. This would require pension contributions of approx. €35,149 every month. This figure is effectively what it costs  the taxpayer  to fund these Ministerial pensions - on top of a Minister’s salary which is just under €200,000 and their expenses which have been subject to such media interest”.

Independent Trustee Company’s study looks at the relative value of these benefits and the comparative cost if these were provided under a regular private sector pension.

Ministerial Pension Benefit
Age of Retirement	New Scheme Pension Entitlements		Salary	Capitalised Cost @ CPI escalation	Est. Monthly contribution required
	Minimum	Maximum		Maximum
50	20%	60%	€191,000	€6,870,504	€35,149
55	20%	60%	€191,000	€5,787,879	€29,610
60	20%	60%	€191,000	€4,786,967	€24,490
65	20%	60%	€191,000	€3,875,550	€19,827
Notes:
Based on Annuity Quotes as at 11.10.2010
Assume Male, Married (with 50% spouses pension)
Salary of €191k w.e.f. Dec 2009

If Ministers’ pension benefits were to be subject to benefit-in-kind, it would wipe out their entire salary and they would receive a bill rather than a salary every month.

Entrepreneurs Pension Benefit
In comparison a self-employed entrepreneur must fund the entire cost of the pension benefit out of their own funds – subject only to the benefit of tax relief on contributions.

There is a stark difference between the two benefits with the Minister being provided with a guaranteed benefit which is more than 10 times what an entrepreneur paying maximum contributions can hope to get in unguaranteed format.

For further information log onto the news section of our website:

Full press release
Media coverage
Interview on NewsTalk