GODFREY’S GOSPEL
OCTOBER is a great month for the sale of pensions. All those involved in the business concentrate on the tax advantages and the need to make provision for the future.
Last week, there was a lot of talk about pensions – all negative, even though pension funds have yielded good results over the past year. First you had ‘experts’ commenting on how the state could save up to €1 billion a year by only giving tax relief on pensions at the standard rate. Then you had other ‘experts’ commenting on how people in the high-earning category were going to receive some of the best self-funded pensions in Europe, thanks to the fact that Ireland allows a larger pension fund and earnings limit than any of our European counterparts.
First of all, let me say that the so-called saving of €1 billion is just an estimate of tax relief – not a cost, where the state actually has to hand out hard cash. Second, when commenting on the size of pension funds, no-one seemed interested in stating that any change to the current arrangement would create a two-tier system: one for the ordinary punter and the other for those on state pensions.
At the moment, we all know of politicians – either failed or otherwise – who have pensions that exceed €100,000 a year. These are index linked and they are guaranteed to last for life.
If these people live into their early 80s, they will have exhausted a personal pension fund of more than €4 million to €5 million – double what an ordinary individual is allowed to create in their own pension pot. Some people in receipt of state pensions are now trousering more cash than when they were actually working.
Good luck to them is all I can say. I don’t begrudge their good fortune one little bit. But if that is okay for a select group, why can’t everyone else receive similar consideration.
A few years ago, former finance minister Charlie McCreevy recognised thatIrelandwas facing a pensions timebomb and decided to create the pension reserve fund. That was supposed to be ringfenced to provide for the ageing population in years to come, when the numbers in receipt of state benefit was estimated to explode.
Thank God he did, even though it now appears that, by the time it will be needed, there will be little or nothing left. Why? Because without it, we would not have been able to bail out the banks and every other financial institution in this little country of ours.
Irrespective of whether or not the fund will be there when we need it, the fact remains that without incentives people will be reluctant to contribute to a personal retirement plan.
If any limits are to be imposed, wouldn’t it only be right and proper that everyone – irrespective of whether they’re employed by the state or not – gets equal treatment?
