Finance (No. 2) Bill 2011 – Pensions Levy
The Finance (No. 2) Bill 2011 introduces a levy on pension schemes and equates to an annual stamp duty of 0.6% on the market value of assets under management in pension schemes.
The levy will apply for a period of four years (2011 to 2014). The schemes affected are Revenue Approved Retirement Benefit Schemes (i.e. Occupational Pension Schemes), Buy-out Bonds, AVCs, Retirement Annuity Contracts /Personal Pensions, RAC Trust Schemes and Personal Retirement Savings Accounts.
It appears that the Pensions Levy will not apply to the following:
- Vested-PRSAs (i.e. PRSAs from which the PRSA holder has already taken a lump sum),
- ARFs and AMRFs,
- the assets of Occupational Pension Schemes in respect of employees whose employment is or was wholly exercised outside the State,
- where the Trustees of a scheme have passed a resolution to wind-up the scheme and where the business, in respect of which the scheme was established, is insolvent.
The value of the assets subject to the levy in respect of each year, is the market value of the assets on the date of publication of the Finance (No. 2) Bill 2011 (i.e. 19th May 2011) in respect of the year 2011 and on 1st January in each of the years 2012, 2013 and 2014 (or, where audited scheme accounts are prepared for schemes with more than 100 members on the last date of the accounting period ending in the twelve month period preceding those valuation dates).
The chargeable persons for the levy are Trustees or Administrators of pension schemes and Life Offices having the management of the assets of pension schemes.
Letters from Policyholder / Trustees
There have been several articles and blogs suggesting that Policyholders / Trustees should send a written instruction to Life Offices stating that the levy must not be deducted from their benefits without first testing the levy’s legitimacy through the courts.
The legislation refers to the levy liability being a “necessary disbursement from the pension fund of the insurer” and that consequently each Life Assurance company will amend policy benefits accordingly, as their policy conditions allow. The pension providers have yet to advise how this issue will be handled.