How is it possible that ministers who have waited so long to take power could not see that their proposed four-year smash-and-grab raid on the pension savings of thousands of private-sector workers is a bad idea?
Not only does the idea sound worse every time a minister comes out to promote it, their arguments make it clear it should never have seen the light of day in the first place.
While the Government is right to see how some of the €76bn in managed Irish pension assets can be released to help rebuild the economy — this is definitely not the way.
Did it not occur to anyone that this would drive a further wedge between the public and private sectors?
Did no one grasp the fact that this is not a tax, it is a raid on savings?
Did no one check to see if the idea could survive intact beyond the 48-hour mark?
The acknowledgement by the Taoiseach that the Approved Retirement Funds of higher earners would be exempted only served to show how poorly thought out this idea was before making it into Michael Noonan’s speech.
To assert, as Brendan Howlin has attempted, that this is just like increasing DIRT on deposits is plain and simply wrong. It is an attack on capital that takes money directly out of ordinary workers’ retirement savings.
These are not the high earners Ruairi Quinn spoke of when he dismissed all concerns saying they had benefited from huge tax reliefs in the past. These are ordinary workers who were encouraged to provide for their retirements, but even so, this money would be liable for tax when it is drawn down.
The proposal, if it goes ahead as outlined last Tuesday, could have a double or even a triple-whammy effect.
The first blow could hit many thousands of elderly people living on modest private pensions, paid into from their own earnings long before the Celtic Tiger, as they see their pensions cut.
The second blow could see further reductions in already hard-pressed defined benefit schemes, resulting in many winding-up as happened with Waterford Glass.
The third would be the most ironic of all, as the alternative to reductions in these defined benefit schemes is increased employer contributions. So, the initiative which was planned to make it easier to create jobs could end up increasing the cost of employing those already in work.
Is this really what Fine Gael and Labour spent 14 years working on?
What they should have done was to take on board the scheme I proposed over a year ago in the Sunday Independent. It would have provided much needed business credit by allowing temporary and
regulated access to the €76bn private Irish pension funds.
All sectors have a role to play and that includes the Irish pension industry.
The scheme would allow pension fund holders to borrow money from their funds for five years without income tax penalty. Money not paid back into the funds at the end of the five-year period would be taxed as income thereafter.
Instead, the Government showed us how unambitious and unimaginative it truly is. It comes up with a €450m-a -year raid on individuals’ savings but rejects a real stimulus scheme that could release multiples of that. Worse still, this raid is only to provide top-up funding as an incredible 78 per cent of all capital funding announced in Tuesday’s ‘initiative’ was already in the departments’ budgets since before the election.
Well, maybe some ministers have a more active imagination than I thought.