Thursday, 5 March 2020
Department of Finance
91. To ask the Minister for Finance the amount raised by the Exchequer from the levy introduced in 2011 on pensions by year; the long-term effect this levy will have on pensions for those who worked in the semi-State sector who do not have an entitlement to the State contributory pension; and if he will make a statement on the matter. [3325/20]
It is assumed the Deputy is referring to the stamp duty levy on pension funds, i.e. the pension levy, which was in operation from 2011 to 2015.
I am advised by Revenue that a table showing stamp duty receipts, including the levy on pension funds, for the relevant years, is available on the Revenue website at the link: www.revenue.ie/en/corporate/documents/statistics/receipts/stamp-duty-receipts.pdf.
The data requested by the Deputy are set out in the following table:
For the years 2016-2018, the amount collected by the pension levy is set out in the following table:
The pension fund levy was introduced in 2011 in the wake of the financial crash and at a time when the economy was in serious difficulties. Urgent action needed to be taken to preserve and boost jobs and it is an unavoidable fact that difficult economic situations require hard and very often unpopular decisions. All sectors of the economy had to contribute to the recovery plan and the levy was designed to claw back a small amount of the very generous tax reliefs that those contributing to pension arrangements had benefitted from over many years. The levy went to fund the tax reductions and expenditure measures introduced in the Jobs Initiative, including lowering the VAT rate for the tourism sector to 9%. The levy was successful and did its job as reflected in the increased activity and employment in that sector. The trustees of pension schemes affected by the levy had the option of adjusting current or prospective scheme benefits to take account of the levies, which included the possibility of reducing future retirement benefits.
For the years 2011, 2012 and 2013 the rate was 0.60% of the pension scheme assets. For the year 2014, the rate was 0.75% of the assets and for the year 2015, the final year of the levy, the rate was 0.15%. Under the legislation, the payment of the levy was treated as a necessary expense of a pension scheme and the trustees or insurer, as appropriate, were entitled where needed to adjust current or prospective benefits payable under a scheme to take account of the levy. It was up to the trustees or insurer to decide whether, when and how the levy should be passed on and to what extent, given the particular circumstances of the pension schemes for which they are responsible.
However, the legislation also included safeguards aimed at ensuring that, should the option of reducing scheme benefits be taken, it had to be applied in an equitable fashion across the different classes of scheme members that could include active, deferred and retired members. In no case could the reduction in an individual member's or class of member's benefits exceed the member's or class of member's share of the levy. Where pension scheme trustees or an insurer took the decision to treat the levy as an expense of the pension scheme, they would have adjusted current or prospective benefits payable to members under that scheme. The consequence of this treatment by the trustees or insurer could be a permanent reduction in members' benefits.
The value of the funds raised by way of the levies have been used to protect and create jobs and this has helped to create the improving financial and economic position of the State. Taxpayers to whom the impact of the levy may have been passed on by the chargeable persons responsible for the payment of the levy (the pension scheme trustees, etc.) will have since benefited from tax reductions in the last number of Budgets.
In relation to entitlement to the State pension for semi-State employees, entitlement to the State pension is a matter for the Department of Employment Affairs and Social Protection, but I can advise that modified rate PRSI contributors who do not have sufficient means may qualify for the means tested State pension (non-contributory).