A Possible Return Of The Pension Levy?

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Following a recent €180 million deal for the Waterford Crystal Pension Scheme members, in which the State has been forced to fund the pension deficit of the wound up pension scheme, at least four other pension schemes have contacted the Department of Social Welfare seeking support for underfunding issues.

While four schemes might be small in comparison to the Waterford deal, this could represent the tip of the iceberg.

This begs the question, how does the State intend to pay for all of these packages?

  • The Pension Levy of 0.6% introduced in 2011 has resulted in a reported €2.39 billion income for the Government – with nobody marching on Leinster House.
  • The reduced 0.15% levy of this year resulted in a €169m windfall. (yes, original 0.6 was abolished with a 0.15 levy introduced for 2 years. It is due to be gone next year 2016.)
  • Although it was confirmed in Budget 2016 that the pension levy will be abolished, we could see its return if there are more claims by underwater schemes for support.

A possible reintroduction would undoubtedly lead to more financial pressure on existing defined benefit schemes, forcing further reductions and possible future claims.  Definitely a space to be watched as we enter the new year.