Irish Government Announces EUR1.4bn Pension Levy

by Robert Lee, Tax-News.com, London

06 February 2009

Brian Cowen, Prime Minister of Ireland, has announced measures to save the Irish economy EUR2bn, as a first step to eliminating Ireland's current budget deficit by 2013. The measures include a pension related deduction on public sector earnings, worth EUR1.4bn.

A statement released by the government warned that eliminating Ireland’s budget deficit represented a massive challenge, and that this week's changes would be followed by further measures worth EUR4bn in 2010 and 2011, EUR3.5bn in 2012 and EUR3bn in 2013.

Announcing the pensions measures, Cowen said:

“EUR1.4bn will be saved on the public service pay bill, the great bulk of which will be achieved through a new pension-related payment to be made by all public servants (including employees of local authorities), with a small element of the total to be secured through reductions in travelling and subsistence rates and other savings. In addition, the increases provided for under the Review and Transitional Agreement with effect from September 1, 2009 and June 1, 2010 will not now be paid on those dates; this will deliver savings of EUR1bn in 2010.”

Other measures announced by the government are expected to save a further EUR690m:

• EUR95m through a reduction in Overseas Development Aid;
• EUR80m through a general reduction of the order of 8% in all professional fees, for example in the legal and medical areas;
• EUR75m through a reduction in the Early Childcare supplement from EUR1,100 to EUR1,000 per year and a restriction to children under 5.
• EUR140m through general administrative efficiencies and savings, including those arising from the non-payment of the scheduled September 1 pay increase arising under the Towards 2016 Agreement, through further savings in advertising, PR and consultancies; and through savings on defence equipment;
• EUR300m through an across-the-board reduction in the 2009 Budget Exchequer capital allocations.

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