Fianna Fáil Finance spokesperson Michael McGrath has highlighted the failure of the Government to provide any meaningful information on how it plans to spend the additional 0.15% levy on pension funds introduced this year. At the time the Minister for Finance announced the extra 0.15% charge he estimated it would raise €270m over two years. This was in addition to the €550m annually from the 0.6% charge on all private pension funds.
Deputy McGrath commented “The reality is that given the strong performance of equity markets and government bonds in the intervening period it is in fact likely that he will get over €300m from the tax. This is coming from the hard earned savings of current and future pensioners.”
In a parliamentary reply the Minister failed to provide a clear answer as to how the money will be deployed merely stating “The yield from the additional levy in these years forms part of general tax revenue of the Central Fund and is not hypothecated to any particular or specific item of expenditure.” However in Budget 2014 he was keen to justify breaking his promise to end the pension levy on the basis that it would “make provision for potential State liabilities which may emerge from pre-existing or future pension fund difficulties.”
Deputy McGrath added “Last year the Government was forced to admit that a considerable amount of the funds raised from the original pension levy had not be spent as intended as the plan to scrap the air travel tax was long fingered. It was only under sustained pressure from Fianna Fáil that the Government was forced to admit that there was a considerable underspend of the pension levy on the items it was supposed to fund. We are now facing a similar lack of clarity on the additional 0.15% levy.
“Pension scheme members, in particular those in Defined Contribution schemes who would never be in a position to benefit from any form of state underwriting of pension liabilities will be particularly concerned to ensure that the massive sum of money is put to use in the manner intended and does not merely shore up the general government finances.
“I welcome the recent conclusion of the dispute in relation to the Waterford Crystal pension scheme. This took an inordinate length of time to resolve and was the cause of considerable anxiety to scheme members. The government need to establish if there are similar schemes which fall in to this “double insolvency” category where both the employer and the pension scheme itself are wound up. For other schemes which have got into difficulty the government needs to make clear what role if any the funds raised from the levy will play in assisting current and future pensioners. There has been a considerable sense of drift associated with pension policy on the part of Ministers. Pension schemes have been regarded as a convenient source of funds to dip in to with little regards for the long term impact of such policies. The failure to provide clarity as to how the levy will be deployed only adds to this sense of policy drift.”
Please below reply to recent Parliamentary Question:
To ask the Minister for Finance the way he plans to provide for potential State liabilities which may emerge from pre-existing or future pension fund difficulties; if he has estimated the possible range of these liabilities; and if he will make a statement on the matter.
In Budget 2014 and Finance (No 2) Act 2013, I introduced an additional levy on pension funds at 0.15% for 2014 and 2015 to help fund the Jobs Initiative and to make provision for potential State liabilities emerging from pre-existing or future pension fund difficulties. The yield from the additional levy in these years forms part of general tax revenue of the Central Fund and is not hypothecated to any particular or specific item of expenditure. It is envisaged that any State liabilities to pension fund difficulties would be met by the Exchequer as they arise.
As regards estimates of the possible range of liabilities that may be involved, these are matters for my colleague, Ms. Joan Burton TD, Tánaiste and Minister for Social Protection.