Pensions & the Government Four-Year Plan
Private Pensions
The main proposals that impact on private pension provision are:
Year | Reduction |
2012 | 34% |
2013 | 27% |
2014 | 20% |
The Government is committed to rising €700m from the pensions sector over the period of the plan and is willing to engage with the industry to examine alternatives to deliver this outcome. This suggests to me that a reduction in the personal relief is not necessarily a done deal.
Turning to pension fund investments, the Government is considering proposals to encourage pension funds to invest in Irish Government Bonds. The NTMA will issue a CPI linked bond next year. The National Pension Reserve Fund will be used to support the Irish Government Bond Market.
Public Sector Pensions
Revised pay and pension arrangements will be introduced for all new entrants. Benefits will be calculated using career average and any pension increases will be linked to CPI. The existing retirement will be raised to link in with the proposed increases in the ages when the state pension becomes payable: 66 in 2014, 67 in 2021 and 68 in 2028. Presumably all private sector schemes will follow suit.
Existing pensions cut as follows:
First €12,000 0%
€12,001 – €24,000 6%
€24,001 – €60,000 9%
above €60,000 12%
Income Tax
The next 4 years will see a reduction of 16.5% in the value of tax credits and tax bands, with 65% of the reductions in 2011. There are other options including a mixture of the above changes to tax rates, PRSI and income levies. Final arrangements in the Budget. On average we will all pay 10% more in 2011.
A number of reliefs will be abolished in 2011 included those linked to trade union subscriptions, rent relief and approved share options schemes. The income tax age credit and age exemptions will be phased out over 4 years.
Social Welfare
Total expenditure will be reduced by €700m and details of rate reductions will be announced in the Budget. We can expect a reduction in the level of state pension payments.
NB Funding rates for Directors pensions are still very attractive.