Madam, – You will remember that some years ago when Charlie McCreevy reduced the VAT rate, retailers did not reduce prices but just pocketed the difference.
The same will happen again. It is galling to see my pension fund being pilfered to enrich fast food outlets, cinema owners and hairdressers. – Yours, etc,
Madam, – If someone I knew came to me and asked me if they could take a percentage of my hard-earned savings, I would have to satisfy myself that they are worthy of it and, most importantly, good for it. In the case of the pension levy, I would have to say no because, with respect, the Irish government is certainly not good for it. – Yours, etc,
Madam, – The political expedient of raising taxes on pension funds has already been executed in the UK with disastrous results. Following the Labour Party victory in the 1997 election, Gordon Brown, the then chancellor, removed the tax exemption on dividends received by pension funds from their shareholdings. In effect, this was a levy of around 0.6 per cent per annum. It raised a huge sum, ostensibly to pay for a temporary scheme to solve youth unemployment.
It received public applause, including an editorial in the Financial Times, accompanied by the usual political rants about taxing wealthy tax dodgers.
The result over time was the destruction of almost all privatesector final salary schemes. The compound interest effect of this tax increase was to render pension schemes unable to meet future obligations, with the inevitable result that employers had no option but to close them, initially to new employees and eventually to all employees.
By this single misguided measure, the British government destroyed the entire private-sector final salary pension system that had ensured security in old age for the majority of the labour force, from factory labourers to company chairmen, usually from age 65.
To add insult to injury, public-sector employees were unaffected and still retire to enjoy their gold-plated, inflation-proofed final salary pensions from age 60.
A lasting effect – also visible here in Ireland – is a rising resentment against the privileged position of the public sector, whose comfortable retirement is being paid for by a private sector destined to retire into comparative poverty.
The ultimate injustice of it all is this: without the levy, pensions would be higher, and the increased spending of the pensioners would create more employment – without, of course, needing an army of overpaid civil servants to administer job creation schemes. – Yours, etc,