They’re at it again.
Robert Early writes:
Pointing out something that should be of great interest to any of your readers that pay into a defined contribution pension scheme.
Currently you only pay tax on this when you take out your pension after you retire, not when you pay in. The Government has announced a proposed reform to this scheme: The IT explains it in more details here.
What it boils down to is that if you are on the higher rate of tax, you will be losing this benefit and will now be paying 20% on your contributions, as well as the income tax when you take it out after retirement.
This is a new stealth tax, but nobody seems to be jumping up and down about it.
Anyone?
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This seems like a bit of a short-sighted measure; we should be encouraging people to provide for their retirement, not penalising them for it.
that surely defeats the point of a pension? if you get taxed twice on it, and might lose it if there’s another recession, then why have one? surely saving would be better, than setting up a fund for yourself which the gov. keep dipping into. genuine question btw, i dont have a pension and dont fully understand them, but doesnt seem like a great idea.
Cant see a problem here. I pay into my pension every fortnight and then I have to pay the pension levy on top of my contributions.The levy does not get add to my pension, its just a pension tax.
We’ll, you’ve already paid tax on your income. Now you be paying tax on the way into the pension and on the way out. Same money taxed 3 times before you see it. Then there is the pension levy.
Indeed, Imagine going to an ATM and only getting 40 euro for every 50 you withdrew because the government introduced a 20% “withdrawal tax.” That’s what it amounts to in pension terms.
Sounds like a public sector pension? The change is for defined contribution pension schemes, i.e. your typical private sector pension.
That’s what I assumed myself. But when shouldn’t the private sector pay a tax like the public. And before some one tells me “oh well your pension is fantastic”, I’d gladly leave the pension if I was allowed.
**but WHY shouldnt**
The only legislation our Government does these days is to add taxes, deductions and levies directly and indirectly (see the new levy on insurance on it’s way). No one can explain why I have a Survivors Pension deduction on my wage slip even though I am unmarried with no dependants. Can I get it back until I marry (if ever)? No. I also have a Pension Related deduction AND a Pension 3.5% deduction along with 2 other pension deductions. Can’t wait for 66 for the cash to flow in……no hold on, it’ll be 68 cause Leo and that lads are extending pension age (for us plebs only not for them).
Not to be a mouthpiece for the government but after the tax free lump sum of 25% is taken at retirement, if you were to just have the state pension of €13K per annum you’d need the pension pot to be able to purchase an annuity of €23k before you start to pay tax at the higher rate (a fund of approx a half million). Studies and calculations are showing that the majority of people drawing down a pension are paying little or no tax as their incomes are so low in retirement.
Wouldn’t agree with the measure proposed as many young people will reduce contributions but the argument will be that the person on the average wage will only pay the standard rate of tax in retirement and so are getting a tax subsidy now. Doubtful the state pension will exist in its current form at all in 20 or 30 years though…