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'Crisis Of Confidence' In Irish Government Pension Policy

by Robert Lee,, London

26 September 2011

The pension industry is being asked to do too much to help bolster Irish economic recovery, the head of the country's largest pensions company has said, warning of a crisis of confidence in the government's pensions policy.

Speaking at an Irish Life-organised conference on pensions policy, the firm's chief executive, Gerry Hassett, said that the government risks dissuading middle income earners from saving to fund their retirements. According to a new survey by Amarach Market Research for Irish Life, 70% of those aged 24-65 believe that the Government is not actively trying to encourage people to save for retirement. Hassett said that, should the Government move to end tax relief for pensions at the marginal rate, it would be hard to persuade middle income customers to put away money for 20 or 30 years.

Hassett also emphasised the strain placed on the pensions industry by the current economic situation. At present, funding the average public servant's pension costs five times the amount that the average private sector worker has saved for their retirement. In future, the ratio of "workers to retirees" is expected to drop by half by 2030, which Hassett says will have with drastic implications for the country's ability to support pension payments for those dependent on state pensions.

Hassett added that while the pensions industry was happy to play a role in addressing the economic challenges, the industry was being asked to do too much. In particular, the introduction of a pension levy is expected to have a considerable impact. As part of a Jobs Initiative package unveiled by the Finance Minister earlier in the year, the government stipulated that a 0.6% tax is to be charged on all assets under management of funded pension schemes and personal pension plans established in Ireland.

Of this initiative Hassett argued, "The industry is happy to play its part to tackle our economic problems but as of now it's being asked to do too much. Even without the pension levy, the industry was targeted to finance EUR1bn of the total EUR15bn fiscal adjustment for the public finances. Having signed up for that adjustment, the additional imposition of the pension levy has had a devastating impact." Hassett said that the pension levy had hit profits at Irish Life by EUR13m in the first six months of the year.

According to Irish media reports on the conference, the Minister for Social Protection, Joan Burton, has hinted at a potential government re-think on the pension levy. She insisted that the government does wish to see more saving for their retirement, and added that she is aware of the impact on savers of changes to pension legislation.

TAGS: tax | economics | pensions | Ireland | fiscal policy | retirement | budget | tax rates | tax reform

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