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News : Irish Economy Last Updated: Dec 2, 2013 - 7:22 AM


Standard Life, Eddie Hobbs and Noonan's pensions' heist
By Michael Hennigan, Finfacts founder and editor
Dec 2, 2013 - 7:17 AM

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Michael Noonan, finance minister.

We have in the past highlighted how Michael Noonan, finance minister, due as a former teacher turned politician to benefit from 3 public pensions linked to current earnings, had targeted private pensions for a heist at a time when companies were phasing out defined benefit (guaranteed payout) schemes.

We have also reported that more than half of the private sector workforce has no occupational pension.

Last week, Standard Life, the life and pensions company, said the recent Finance Bill pensions levy increase "is very unfair on hard-pressed savers as the government reneges on its promise to abolish it." The government announced an increase in the levy on private pension savings from 0.6% in 2013 to 0.75% in 2014 in this year’s Finance Bill and a further 0.15% levy in 2015.

“The taking of 0.6% of ordinary people’s hard earned pension pots for the past three years has been bad enough, without rubbing salt into their wounds and reneging on a promise,” said Jim Connolly, head of pensions, Standard Life.

Michael Noonan said in Budget 2012 and again at a public forum earlier in 2013 to reiterate that he was going to abolish the 0.6% levy at the end of 2013. “Ordinary savers would welcome certainty on pensions, encouragement to save and the re-assurance of their continued tax efficiency,” said Connolly

Standard Life noted that the government has deducted almost €1.5bn from private pension savers in the last three years and now plans to deduct a further €675m next year.

“It is unrealistic to think private pension savers who have already stumped up over a billion in the past three years will pick up the tab for the failure of private and public sector schemes. We think this is unfair and should finish in 2014 as promised,” said Connolly. “Pensions are still the most tax-efficient way to save for your retirement,“ he said.

Eddie Hobbs, the financial consultant, said on Friday in response to the Standard Life comment:  "In 2011 the pensions industry sat idly by, including its professional representatives on very large remuneration packages and put their thumbs in their mouths. The so-called Jobs Initiative funded by appropriating capital was announced. The industry and life offices did nothing. I don’t mind saying it but I was the only voice calling for action. That action, radio and print reviews, which was specifically resisted by RTE current affairs, told consumers to instruct Trustees that they’d no permission to pay the levy. Still the industry stood by. When the Government reacted by threatening trustees with daily fines, unprecedented in economic and legal history, the industry stood idly by.

When, outflanked consumers, wrote to the president to demand that the bill be referred to the Supreme Court because it was not a taxing bill but an appropriation of capital, the industry stood idly by. Instead the pensions industry, fearful of the many ills it hides including high costs, lousy management and slow service preferred to engage in the background.

Over the crisis years, the establishment has created an apartheid pensions model. Its pricing of accrued benefits in PS pension schemes using a 20 times factor was a plain old-fashioned corrupt self-enrichment. Still you said nothing.

The result now is that the Government and the Department of Finance sees private pensions as a honey pot to be raided when tackling real issues becomes difficult.

This is a pathetic circular, three years after the industry surrendered. The Department of Finance will treat it with all the seriousness of being attacked by a Telly Tubby."

Aileen Power of Standard Life directed the media to two statements in pensions that the company had issued in 2011:

http://library.standardlife.ie/Press/2011/20111010GovCantJustifyCuttngRelief.pdf

http://library.standardlife.ie/Press/2011/2011_07_05_taxrelief.pdf

Finfacts, Nov 2012: Irish Economy: Pension fund charges are taking 17.4% of retirement savings in occupational schemes

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