Cut to pensions tax relief will lead to mass exodus by savers, warns provider.
Government proposals that could see the income tax relief on pensions cut would be calamitous for middle earners, a leading investment company has warned. Halving the reliefs would lead to a mass exodus of middle-income earners from retirement schemes, Standard Life warned. The pensions provider said reducing tax relief will mean it costs higher-rate taxpayers more each month to save the same amount into pensions. Halving the tax relief would cost higher-rate taxpayers making a €330 monthly pension contribution some €600 a year if they want to maintain the same level of payments into the scheme. People in the private sector would be the big losers, Standard Life said. Already the average public sector pension is 80pc higher than the average in the private sector. People retiring from the public sector have an annual pension of €25,000 a year on average. This compares with €14,000 for those private sector workers who have a retirement scheme. Standard Life’s managing director in Ireland, Michael McKenna, said this means the average public sector worker receives nine times more pension tax relief than their private sector counterpart. Fears of a move to cut the tax relief on pensions have been sparked as a committee of civil servants, chaired by Department of Finance officials, is examining the issue. The Interdepartmental Pensions Reform and Taxation Group is expected to report early next year. The Department of Finance said the group is looking at pension reform and simplification, as well as reviewing the cost of supplementary pensions to the Exchequer. It held a public consultation and is reviewing around 50 responses. The spokesperson said the Standard Life commentary related to the proposals for the auto-enrolment pension, but the proposals on that do not take any position on the system of tax relief for those saving for retirement using traditional pension products. Charlie Weston, Irish Independent