Dáil Éireann debate -
Thursday, 24 Jun 1999

Vol. 507 No. 1

Written Answers. - Pension Provisions.

Noel Ahern

Question:

62 Mr. N. Ahern asked the Minister for Finance if he will give details of the special levy imposed on pension funds in the Finance Act, 1988; if it applied to pension funds of State and semi-State bodies only; the number of funds affected; the amounts levied on each; if amounts will be refunded in view of the fact Exchequer finances have improved; if some pension funds have suffered due to the levy; and the consideration, if any, he will give to the case of a fund (details supplied) where pensions to retired staff are below the norm and the reasons given to members is the effect of the 1988 levy. [16250/99]

Minister for Finance (Mr. McCreevy)

The special levy on pension funds provided for in the Finance Act 1988 consisted of a charge of 6 per cent on the net imputed income of pension funds in 1988. Net imputed income for the purposes of the levy was determined by reference to an assumed return of 9 per cent on pension fund assets valued at 1 January 1988 after allowing a deduction for pension payments made in 1988. Apart from an exemption for small pension schemes with chargeable amounts of not more than £5,000, the levy applied to all occupational pension schemes in the private and public sectors.

While it is not possible in the time available to indicate the number of pension funds which were subject to the levy or to give a breakdown of the amounts paid by each fund, the total Exchequer yield from the levy was approximately £14 million.

The levy was introduced as a once-off revenue raising measure at a difficult time for the Exchequer. While the Exchequer position has improved considerably since then, there is no provision in the legislation for a refund of the levy and, as is generally the case with any tax measure, I have no intention to amend the legislation to provide for such a refund.

I do not believe that pension funds suffered unduly from the levy, which after all amounted to an effective charge of just 0.54 per cent, 6 per cent of 9 per cent, of the assets of pension funds net of pension payments in 1988. Since that time, pension funds have performed extremely well with annual investment returns averaging at over 15 per cent in the ten year period 1988 to 1997 inclusive. Also, no further taxes have been imposed on pension funds and such funds remain exempt from taxation on their investment returns. It should be stressed that Irish occupational pension provision has extremely favourable taxation arrangements covering tax-relieved contributions, tax-relieved investment returns and tax-free lump sums in the hands of the pensioner.

Regarding the particular case mentioned by the Deputy, I am advised that the actuarial reports completed by independent actuaries, based on valuations between 31 March 1997 and 1 April 1998, disclosed that the schemes of the company in question are not under-funded and that they have a surplus of assets over liabilities. While the level of pension increases is a matter for the pension scheme trustees, I understand that the scheme in question has increased pensions annually by the growth of the Consumer Price Index since 1987.