The ever deepening crisis in the funding of pension schemes highlights the complete folly of the government’s €2 billion raid on private pension schemes, according to Fianna Fáil Finance Spokesperson Michael McGrath.
Deputy McGrath stated, “This week, the Pensions Board confirmed that 80% of defined benefit pension schemes are in deficit. In other words, they haven’t enough money to pay out the pensions promised to scheme members.
“The Chief Executive of the Pensions Board has said more schemes face the prospect of being wound up and in other cases members will get reduced benefits. What has been the government’s response to the funding crisis in pension schemes? Incredibly, the response has been to impose a 2.4% levy over a period of four years, taking up to €2 billion out of schemes already under the water. The government’s response to the pension crisis has been to make an already bad situation much worse.
“The government pressed ahead with the introduction of this €2 billion pension levy last summer despite warnings from the Pensions Board, senior civil servants, the Troika and Minister Joan Burton about its implications. The government collected over €460 million from the levy last year, and a similar amount will be collected in this coming September and again in 2013 and 2014. Interestingly, the pension levy was one thing that was not promised by Fine Gael and Labour during last year’s election but it was among the first things introduced when they came to power.
“Aside from the obvious financial impact of the levy on schemes, the government seem to be totally oblivious to the damage the levy is doing to the confidence of ordinary people in saving for the future through a pension scheme. The pension levy raid was in effect the government taking some of the private savings of citizens.
“The government has promised that this levy will finish in 2014, but I am very sceptical about this. The connection between the levy and what it was to be spent on has already become blurred. For example, the abolition of the air travel tax was to be funded from the levy but this has not happened. This pension levy is an example of this government making decisions which buy them time in the short term, but which will have a very damaging impact on the economy over the longer-term.”