Industry warns Government not to attack 800,000 middle income earners and to avoid further exacerbating the pensions time-bomb

The Irish Association of Pension Funds (IAPF), the Irish Insurance Federation (IIFIFF), and the Irish Brokers Association (IBA) have today joined forces in a final bid to persuade the Government not to make the intimated changes to the pension tax relief rate.

In a statement today Mike Kemp, Chief Executive of the IIF said, “Up to 2,000 jobs in the life and pensions industry may be lost due to the Government’s planned changes to pension tax relief and the implementation of levies. Obviously, the threat of job losses is never good and should be avoided at all costs. And in the current climate I find it astonishing that the Government is willing to put these jobs at risk while also severely damaging the Irish pensions industry”.

Jerry Moriarty, Director of Policy at the Irish Association of Pensions Funds (IAPF) has also expressed serious concern at the lack of co-ordination of Government policy on pensions, “Minister Hanafin, having previously expressed a preference for any changes to tax relief being incorporated in the pensions policy review process, is now refusing to rule out changes in Budget. The Government’s proposed changes fail to address the recommendation by the Commission on Taxation that any change in taxation of pensions should only be introduced in a more stable economic and pensions climate. These changes are an attack on the 800,000 middle income earners in the private sector, possibly deterring them from increasing or continuing with their contributions”

Ciaran Phelan, CEO of the Irish Brokers Association added, “Changes to the relief could cost someone approaching retirement an extra €2,100 a year to fund a targeted retirement income of half their salary of €25,000. The stress and strain that this will put on these individuals appears to be being ignored by the Government. Whatever the age of the worker, these changes are going to end up costing Irish people money and are likely to further damage the economy in the long term. The inequality between the private and public sector when it comes to pensions is already appalling. If the Government continues with its plan of penalising middle class private sector workers by further reducing the tax relief on contributions they may well put retirement planning well above the affordability levels of most Irish households.”

Mike Kemp went on to comment, “There is little doubt that moving away from marginal rate relief would lead to a reduction in the amount individuals contribute to their retirement funding.  We already have a significant gap between actual and target funding for pensions in Ireland and, while investor confidence is at a low point, markets are recovering and fund values will rise again.  Any pensions reforms should encourage people to make financial provision for retirement, not deter them.”

Jerry Moriarty concluded, “The introduction of such a measure, at a time when employers and individual pension savers are struggling with reduced income, will only lead to a fall in overall pension savings which will ultimately increase pressure on the Exchequer in the future. This move indicates a fundamental failure to understand the actual cost of pensions relief at the top rate. It will severely damage Ireland’s ability to provide for an adequate income in retirement for those earning just over the average industrial wage and middle income earners. Neither has adequate economic analysis been conducted by the Government on the true cost of pensions relief and the impact on revenue and pensions saving if the ground rules are changed. ”