Pension levy making 'a bad situation worse'

Pension levy making 'a bad situation worse'

A leading pensions expert has said the government’s introduction of a 0.6% levy on private pension schemes is making ‘a bad situation worse’.

David Kingston, who has over 40 years experience in the pensions industry, says it is difficult enough to convince people to save for the long term without introducing disincentives.

‘If the patient is lying on the floor and you give him a kick, it doesn’t help’, he says.

Mr Kingston, who’s Chariman of investment advisers Acuvest, has also called for defined pension schemes to be given a ‘decent burial’.

He believes the DB schemes were successful in their day when people’s life expectancy was more stable and interest rates were high. We now have the opposite in both cases, he points out.

‘Defined benefit schemes have limited assets – less than what they need – and in the future people who might be due benefits may not get them.’

Defined Contribution schemes have been the standard replacement, but David Kingston says people are not setting aside enough to get the benefit they would want.

‘Defined Contribution schemes are affected by investment performance, but there’s not the same element of unfairness because the money is assigned to the individual. The individual gets the benefit of what they have.’

Recent figures from the Pensions Board show that four out of five defined benefit pension schemes in Ireland are in deficit.

AIB has announced that it will be closing its defined benefit scheme and moving all its staff onto defined contribution schemes.

There is 1 comment for this article
  1. Paddy at 6:05 pm

    The current pension funding arrangement for private sector employees is unsatisfactory; most DB schemes have closed to new members and/or are in deficit. The replacement DC schemes place the final investment decisions and all the risk on the person least qualified, the scheme member. DC fund members face an investment choice dilemma; invest in equities / bonds and pray, or invest in cash and suffer below inflation returns.

    The current pension provision mechanism with multiple layers of charges and fees taken from the pension pot regardless of fund performance is expensive. Win or lose the investor pays the fees, and particularly in the case of the self-employed, pays dearly. Ironically, it is the private sector workers whose hard work and enterprise produce the exports on which Ireland’s economic recovery and future depend who are worst served by Ireland’s present pension system. The situation described here is plainly unjust to tax paying Irish citizens, many of whom struggle to find the money to put aside in a pension

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