After much speculation, and a number of submissions from the pensions industry, the 2013 Budget introduced measures in which the impact on occupational pensions were few and mainly positive.
The government have stated that it is in everyone’s best interest that as many people as possible continue to invest in pension schemes.
The following measures were announced:
1. Tax relief
Marginal rate income tax relief retained on pension contributions
2. Changes to the maximum allowable pension fund
Tax relief available on pension contributions to subsidise income up to €60,000 per year in retirement. From 2014 arrangements will be put in place to cap subsidies if the pension delivers an income more than €60,000
3. Standard Fund Threshold
The maximum pension fund allowed for tax purposes is currently €2.3million. This will continue for anyone retiring in 2013. The standard fund threshold is unknown and wasn’t disclosed for 2014 but will be discussed at length by a consultation process between the pension industry and the government.
4. Pensions Levy
The Pension Levy, which was introduced as part of the Jobs Initiative, will not be renewed after 2014.
5. Limited early access to funded Additional Voluntary Contributions
Individuals will be allowed a once off opportunity to make withdrawals from their Additional Voluntary Contributions prior to retirement but will be limited to 30% of the value of the individual’s AVC fund. Withdrawals will be liable to tax at an individual’s marginal rate. The option to withdraw will be available for 3 years from the passing of Finance Bill 2013.
2012 Pension Review
Overall, it has been another eventful year for pensions in Ireland with increased visibility in the media coverage.
Much focus has been placed on Defined Benefits schemes and the ability of the employers to fund such schemes. Many schemes have been underfunding, leaving gaping holes in the employees perceived pensions. Many have been wound-up and replaced with Defined Contribution schemes as a cheaper alternative.
No doubt 2013 will be just as eventful as the Budget announcements are given practical effect and the impact of all these changes and announcements are more fully assessed.
2013 Pension Predictions
- Sustained and possibly increasing levels of contentious pensions matters and pensions litigation
- Increased activity and awareness among employees, employers and pension scheme trustees as the potential impact of the impending increase in state pension age from 65 to 66 in 2014 begins to register more noticeably
- Continuing lobbying of the Government by the Pension Industry to keep the tax relief on contributions at the marginal rate of tax
- Continuing trend of Employers switching their existing Defined Benefit schemes to Defined contribution schemes due to the high costs of the former
- Introduction of early access to Funded AVC’s to be introduced post Finance Bill 2013
- Changes to the Standard Fund Threshold in 2014 looming which will encourage people to utilise their increased allowances in 2013.