I thank Deputies for their comments on the proposed amendments to section 71 of the Bill which provides for the introduction of an additional levy of 0.15% on pension scheme assets in 2014 and 2105. The existing levy of 0.6% which was introduced in 2011 to fund the jobs initiative will cease to apply on 31 December 2014. Amendment No. 36 seeks to delete section 71 from the Bill, while amendment No. 37 seeks to reduce the rate of the levy to 0.5% in 2014 and zero in 2015 and all subsequent years. As explained during the debate on Committee Stage, the additional levy of 0.15% will contribute towards continued funding of the jobs initiative and help to make provision for potential State liabilities which may emerge from existing or future pension fund difficulties. In the circumstances, we cannot accept either amendment as to do so would adversely impact on the funding of the jobs initiative and not provide the required provision against existing or future fund difficulties.
The revenue arising to the Exchequer from the stamp duty levy on pension fund assets is, in common with Exchequer revenues generally, not hypothecated or set aside to meet any particular item of expenditure or liability. This will be the same for the additional levy of 0.15% in 2014 and 2015. The revenues from the levies have and will be used to help to fund various measures introduced under the jobs initiative. The proceeds from the additional levy will also help to meet State liabilities which may emerge from existing or future pension funds difficulties. The Government has agreed to meet these liabilities from the Exchequer as they arise.
A significant and successful measure introduced by the jobs initiative is the reduced VAT rate of 9% on tourism and certain other services which was due to end this year. In the Budget Statement the Minister for Finance announced a continuation of the reduced 9% VAT rate and indicated the yield from the additional 0.15% pension fund levy in 2014 and the reduced level of 0.15% in 2015 would continue to help to fund the jobs initiative. The cost of continuing with the reduced 9% VAT rate is estimated at €350 million in a full year and the additional yield from the changes to the levy in 2014 and 2015 is estimated at €135 million in each year. The 0.15% levy is legislated in the Bill to end in 2015.
With regard to Deputy Broughan's comments, while the levy does not apply to unfunded public service pension schemes, this is not to say public servants or public service pensioners have been unaffected by requirements for fiscal retrenchment in recent years. The public service pension reduction, PSPR, was introduced from 1 January 2011.
While the PSPR is not a levy, it is a cut which affects public service pensions.
At the time of its introduction, the PSPR was designed to cut all public service pensions above €12,000 in payment or awarded up to the end of a grace period which ultimately expired at the end of February 2012. It was initially estimated that the PSPR would reduce public service pensions by 4% on average, with more severe effects experienced at higher pension levels as a result of the progressive and multi-band structure of the reduction. The PSPR did not originally apply to pensions of post-grace period retirees on the basis that their pension awards had otherwise been reduced by being based on actual reduced pay rates reflective of the 2010 pay cut, not pre-cut pay rates as applied to retirees during the grace period. A change was made to the PSPR on 1 January 2012, when a 20% reduction rate - previously 12% - was imposed on pension amounts above €100,000. With effect from 1 July 2013, more changes were made to the PSPR to deliver on the Government's commitment to further reduce those public service pensions above €32,500 by between 2% and 5% in certain circumstances, including the pensions above that level of individuals who had retired after the end of February 2012.
In the context of Deputy Róisín Shortall's point, the standard fund threshold, SFT, is not the subject of the amendments under discussion. The changes being made to the SFT regime will restrict the capacity of higher earners to fund or accrue large pensions through tax relief or subsidised sources and will do so effectively over time in line with the commitment in the programme for Government. The changes also represent a balance on conflicting issues as between, for example, the impact of the SFT on defined contributions as compared to defined benefit pension arrangements and also between those who are able to take retirement benefits at an early age and people who can only retire later in their careers.
In order to safeguard the restrictive changes being made to the regime against any threat of a successful legal challenge, the Minister has been obliged to provide, in so far as possible and in accordance with legal advice, for the protection of individual pension rights against any charge of retrospective or unjust treatment. The requirement to protect or "grandfather" pension rights in this way is not new and was put in place when the SFT regime was first introduced in 2005 and when the threshold was previously reduced in 2010.