The government’s decision to increase the pension levy and DIRT tax on savings by 25% from New Year’s Day will have very damaging consequences for those trying to plan for their financial future, according to Fianna Fáil Spokesperson on Finance Michael McGrath.
Deputy McGrath commented, “From 1 January 2014, the pension levy on private pension savings is being increased from 0.6% to 0.75% despite the government’s promise to abolish the levy in 2014. The levy, which has been in place since 2011, has already resulted in pension benefits being reduced for members in payment and has resulted in increased contributions for many of those still contributing to a pension scheme. The government’s latest promise to abolish the levy after it is collected in 2015 will be scarcely believed by those who have had their pensions cut as a result of its introduction.
“The increase in DIRT tax from 33% to 41% also comes into effect on 1 January – an increase of almost a quarter. This punitive increase also has to be seen alongside the government’s decision to apply PRSI at 4% to anyone with unearned income above €3,174 per annum. For many people, a rate of 45% will now be deducted from the interest income they earn on their savings.
“This government has driven a coach and four through the long established policy in Ireland of encouraging people to provide for their own financial future by investing in a private pension and getting into the habit of saving where possible. The introduction of the pension levy – and now the increase in the rate of it – will only serve to discourage people from saving in a pension scheme and many will now fall back on the State Pension for support in their retirement.
“As we enter 2014, the message from this government is that anyone who seeks to provide for their future financial needs will be punished with an increased raid on their private pension savings and a punitive rate of DIRT / PRSI on any interest they earn on their savings.”