IRELAND - The government should allow tax relief on all pensions contributions at 42% and abolish the exit fee penalty for SSIA (Special Savings Investment Accounts) money transferred into pensions savings, argues the Irish Association of Pension Funds (IAPF) in its pre-budget submission.
The measures would encourage retirement savings for low income earners, the IAPF said. Over the next 10 to 20 years, the association believes the government will realise a strong increase in tax revenues as increasing numbers of people start to draw down retirement income from defined benefit pension schemes.
“Without suitable rollover options there is a risk that SSIA outflows on maturity could have a negative impact on inflation and give rise to short term profiteering in non-essential goods and services,” warned Paul O’Brien, IAPF benefits committee chairman.
In addition, the IAPF has called on the government to allow people to increase pension contributions above the current annual maximum limits of 15 to 30%.
The association is urging the government to undertake an immediate review of the Minimum Funding Standard (MFS) for DB schemes.
The current regulatory regime is unduly complex and onerous and is a serious disincentive to company sponsored pension schemes, commented O'Brien. It imposes unnecessary costs and cash flow demands on private and semi state bodies.
He added that the MFS is set too high and represents a major threat to the continuation of DB schemes.
Renewing its call for the introduction of a State Annuity Fund, which would fund pensions in the event of a scheme collapsing, the IAPF said this could be implemented at zero cost to the Exchequer.
This would enhance pension coverage and adequacy, reduce pensioner dependency upon the state (by ensuring a continuation of defined benefit schemes) andunderpin the defined benefit pension system as the cost of meeting the Minimum Funding Standard would be reduced, O’Brien said.
For defined contributions schemes, the IAPF said members should not be forced into annuity purchase upon retirement, especially at a time wheninterest rates and low bond yields and high cost of annuity products maysignificantly reduce the purchasing power of their retirement savings.
It recommends that the ARF (Approved Retirement Fund) and AMRF (ApprovedMinimum Retirement Fund) retirement options be extended to DC schemes.
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