This is a quick summary of the potential effects on pensions (public and private sector) arising from the 2011 – 2016 programme for government with Fine Gael and Labour.
We will abolish the additional pay for Ministers who leave office. We will restrict the payment of pensions to politicians so that in future a member can only qualify for a pension at the national retirement age (currently 65) and upon leaving public life. We will cap taxpayers’ subsidies for all future pension schemes for politicians (and indeed for everybody) that deliver income in retirement of more than €60,000.
We will reform the pension system to progressively achieve universal coverage, with particular focus on lower-paid workers, to achieve better risk sharing, and to provide for greater flexibility for those who wish to retire on a phased basis.
No political pensions will be paid to sitting TDs and in future no retired politician will get a political pension until the national retirement age. Politics must be about service to the public, not financial gain for politicians.
Fine Gael have outlined the following in their election manifesto, so it is likely that some of the following may also appear in government policy over the next 5 years.
A temporary, annual 0.5% contribution for all private pension funds, so that older beneficiaries of past tax relief make some contribution to deficit reduction. An equivalent reduction could be applied to public and private sector defined benefit entitlements.
Abolition of PRSI relief on employer pension contributions.
Allowing defined contribution pension savers to access funds early to meet their current business and personal responsibilities (and taxing the draw-downs).
A cut in the standard fund threshold for pensions to €1.5 million for public and private sector workers, while also increasing the notional annuity cost of defined benefit, final salary schemes from the current 20:1.
An increase in the “deemed distribution” rate on large (Annual Retirement Funds ARFs) to avoid their use for inheritance tax planning.
The net objective of changes will be to cap taxpayer contributions to existing public and private sector schemes that deliver pensions of greater than €60,000 in retirement, while maintaining adequate incentives for younger, middle incomes families to continue to save for their retirement.
There will, per usual, be transition arrangements for those approaching retirement.
Put the tax treatment of employer contributions to Personal Retirement Savings Accounts (PRSAs) on an equal footing with employer contributions to occupational pension schemes.
We will also fix the regulatory problems to allow private pension funds to invest more in Irish business.
By cutting down on waste and inefficiency Fine Gael will keep the Old Age Contributory and Non-Contributory pension at its current level.