CORPORATE pension schemes are fighting Fine Gael’s plans for a €425m emergency levy on retirement funds, setting them on a collision course with leading pension providers, which back the plan.
Fine Gael’s election manifesto endorsed proposals by Irish Life and Zurich Life for a temporary levy, which they said would cause less damage than cutting pension tax relief.
The four-year austerity plan, agreed by Fianna Fail with the European commission and the International Monetary Fund, involves reducing tax relief on pension contributions to 20% by 2014.
The Irish Association of Pension Funds (IAPF), which represents large corporate schemes, has now said a levy would push the schemes deeper into deficit.
Jerry Moriarty, director of policy at the IAPF, said: “The proposed levy places an additional tax on private sector pension savers, and is akin to tapping people’s bank accounts.”
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Fine Gael’s election manifesto proposed a levy of 0.5% a year — twice the level envisaged by Zurich Life when it floated the idea.
The levy was not included in the programme for government, agreed between Fine Gael and the Labour party last weekend, although it remains the basis of the new government’s pensions policy.
Fine Gael said: “There are many policies in the respective Fine Gael and Labour manifestos that are not explicitly ruled out in the programme for government, and which will be considered again by the government at a future stage.”
The programme for government does commit the coalition to capping pensions at €60,000 a year for politicians as well as other taxpayers.
This means that retirement funds would not be allowed to exceed €1.5m, a reduction on the limit of €2.3m introduced in last December’s budget.
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Gerry Hassett, chief executive of Irish Life’s retail business, said: “There was too much emphasis on pensions as a wealth management tool in the past.
“This led to certain excesses that are no longer feasible in the current environment. Pension incentives must be preserved, however, to encourage retirement planning.”