Page 4 - IrishPensions Spring Edition

Irish Pensions Magazine Spring 2013 4
This year our Association celebrates its 40th Anniversary. The similarity of a lot of the
early work of the Association with today’s work is quite striking. At the outset the main
focus of the Association’s committees was on taxation, social welfare, transferability
of pensions and information. In fact some of the main items addressed in the formative
years almost have a Groundhog Day aspect to them with key milestones being the
Association’s responses to the Pensions Green paper of 1976 and the controversial
pension levy of the early 1980s. A push to have pension funds invest more in Irish
infrastructure was also a prominent theme.
One of the main similarities between 1973 and today, is that fundamentally our
pensions system has always comprised of tax incentivised savings, supplementing
the state pension.
Of course, ensuring we preserved these tax incentives so essential to our second tier of retirement provision
was a hugely important area for the Association in 2012, particularly in the face of the very real threat of a move
to standard rate tax relief on contributions.
The IAPF welcomed the various statements from the Minister for Finance, in the December budget and at
subsequent events in support of pensions. Statements that:
• The Government wants to encourage as many citizens as possible to continue to save for retirement,
• The Government stands by its commitment not to renew the pension levy beyond 2014 and
• The Government acknowledges there have been more changes in pension taxation since 2006 than in the
previous 30 years and that certainty was needed
The significance of these statements cannot be overestimated because for the first time in 6 years, we have
seen real action taken to acknowledge the importance of retirement savings and to introduce certainty into
the system. And for the ordinary man or woman on the street, certainty is key, because how can you have
confidence in putting money away for the long haul, when you don’t know where you stand today?
Very importantly, the Government also acknowledged that changing to standard rate tax relief would have
disproportionately affected too many average earners, over half a million in fact. The IAPF, both independently
and working with other kindred organisations through The Tax Policy Group, campaigned strongly against this
proposed change.
The alternative of a lifetime cap of €60,000 on tax incentivised savings for retirement, is in our view, fairer and
much less detrimental to overall retirement savings, but only provided it is implemented in the correct way.
We have outlined very clearly that a critical principle underlying the implementation of the cap should be to
ensure there is greater equity across the public and private sectors and across defined benefit and defined
contribution schemes. Central to this is the factor that is used to convert defined contribution fund amounts into
a pension which we believe should be at least 30 to 1.
We have outlined clearly that retaining a multiplier of 20 to 1 would not be something that the IAPF could support
as it would not even be close to being representative of the true cost of pensions. Operating a system on this
multiplier would be akin to having a €60,000 limit for defined benefit schemes (which over time will become
predominantly public sector) and a lower cap of €35,000 to €40,000 for the almost entirely private sector DC
market.
Also of great importance is ensuring we have automatic index-linking of the cap and fair transition arrangements
for people who in good faith and on the prompting of this State, have already built up pensions in excess of the
€60,000 limit.
Review
Chairman’s Message