Proposed tax relief cuts on new Irish auto-enrolment pensions slammed by critics Proposed tax relief cuts on new Irish auto-enrolment pensions slammed by critics

Proposed tax relief cuts on new Irish auto-enrolment pensions slammed by critics
10 Sep 2018

Pensions consultancy Mercer has expressed alarm over indications that the Irish government may cut tax relief on retirement savings when it rolls out plans for a mandatory workplace pension.

The company was responding to the publication of a long-awaited consultation document on implementing a mandatory scheme to cover most workers, who would be automatically enrolled. 

Danny Mansergh, head of member communications at Mercer, told the Irish Times: "We are pleased to see a push for a significant level of overall contribution at 14% between employer, employee and the state, along with the creation of a Central Processing Agency which will drive down the costs borne by employees and employers. We do, however, have significant concerns about the proposed reductions in tax relief, and the high numbers of people who will be excluded from auto-enrolment."

A proposal within the consultation document suggests the government would contribute €1 (US$1.17) for every €3 (US$3.50) saved by an employee, equating to tax relief of 25%. Higher paid workers can currently obtain relief of 40% on pension contributions.

“It seems strange that a policy aimed at increasing the numbers contributing to pensions would expect to do it by reducing tax relief – bearing in mind that the average full-time worker is a higher rate taxpayer," Mansergh said.

While accepting that the proposed state contribution differed from current tax relief, the Department of Employment Affairs and Social Protection said auto-enrolment was aimed particularly at “people on lower to middle income brackets where the current tax relief arrangements may be less favourable than for higher earners”.

Standard rate taxpayers attract tax relief of only 20% under current arrangements.

Mercer also expressed concern at the exclusion of 675,000 workers from taking out pensions as they are either younger than 23, older than 60, earn less than €20,000 (US$23,317) or are self-employed. It urged the government to reconsider “such widespread exclusions”.

The government claimed that 410,000 workers who are currently without pensions would fall under the mandatory arrangements but said that other workers could opt in.

 Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER ARTICLES THAT MAY INTEREST YOU

Ireland denies being tax haven despite low rates paid by top companies

The regulatory impact of Northern Irish devolution

How to get value for money from your workplace pension scheme

Pensions consultancy Mercer has expressed alarm over indications that the Irish government may cut tax relief on retirement savings when it rolls out plans for a mandatory workplace pension.

The company was responding to the publication of a long-awaited consultation document on implementing a mandatory scheme to cover most workers, who would be automatically enrolled. 

Danny Mansergh, head of member communications at Mercer, told the Irish Times: "We are pleased to see a push for a significant level of overall contribution at 14% between employer, employee and the state, along with the creation of a Central Processing Agency which will drive down the costs borne by employees and employers. We do, however, have significant concerns about the proposed reductions in tax relief, and the high numbers of people who will be excluded from auto-enrolment."

A proposal within the consultation document suggests the government would contribute €1 (US$1.17) for every €3 (US$3.50) saved by an employee, equating to tax relief of 25%. Higher paid workers can currently obtain relief of 40% on pension contributions.

“It seems strange that a policy aimed at increasing the numbers contributing to pensions would expect to do it by reducing tax relief – bearing in mind that the average full-time worker is a higher rate taxpayer," Mansergh said.

While accepting that the proposed state contribution differed from current tax relief, the Department of Employment Affairs and Social Protection said auto-enrolment was aimed particularly at “people on lower to middle income brackets where the current tax relief arrangements may be less favourable than for higher earners”.

Standard rate taxpayers attract tax relief of only 20% under current arrangements.

Mercer also expressed concern at the exclusion of 675,000 workers from taking out pensions as they are either younger than 23, older than 60, earn less than €20,000 (US$23,317) or are self-employed. It urged the government to reconsider “such widespread exclusions”.

The government claimed that 410,000 workers who are currently without pensions would fall under the mandatory arrangements but said that other workers could opt in.

 Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER ARTICLES THAT MAY INTEREST YOU

Ireland denies being tax haven despite low rates paid by top companies

The regulatory impact of Northern Irish devolution

How to get value for money from your workplace pension scheme

Leave a Reply

All blog comments are checked prior to publishing