After much speculation, and a number of submissions from the pensions industry, the 2013 Budget was announced yesterday, with the measures which will impact occupational pensions being few and broadly positive. In delivering his financial statement, the Minister for Finance announced the Government’s pension policy stating, amongst other things, that “As it is in everyone’s best interest the Government wishes to encourage as many citizens as possible to continue to invest in pension schemes.”
To give effect to the stated Government pensions policy, the following measures were announced:
- Tax relief
Tax relief on pension contributions will continue at the marginal rate of tax.
- Changes to the maximum allowable pension fund
Tax relief on pension contributions will only serve to subsidise pension schemes that deliver income of up to €60,000 per annum. Changes will be put in place in 2014 to the maximum allowable pension fund at retirement for tax purposes (the Standard Fund Threshold). Further detailed analysis of the necessary changes will be required.
- Pensions Levy
The Pension Levy, which was introduced as part of the Jobs Initiative, will not be renewed after 2014.
- Limited early access to funded Additional Voluntary Contributions
Individuals will be allowed an option to withdraw up to 30% of the value of funded Additional Voluntary Contributions made to supplement retirement benefits. 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.
Overall, it has been another eventful year for pensions in Ireland. We have seen the introduction of Sovereign Annuities, the restoration of the statutory funding standard introducing risk reserve requirements, the re-introduction and extension of the deadline for submitting funding proposals in relation to defined benefit pension schemes and now the Budget 2013 pension announcements.
That’s not to mention the increased visibility of pensions in media coverage and the unusually increased level of pensions litigation in Ireland during the year. 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.
- Sustained and possibly increasing levels of contentious pensions matters and pensions litigation; and
- 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.