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Pensioners Thrown Back in the Budget Firing Line

The Government have come under major scrutiny as a result of budget 2014 even though Minister for Finance Michael Noonan had promised that people would be “astounded” with all the good news he would announce. Both young and old people have been hit with a range of cuts in entitlements, allowances and benefits, with more to follow in the finance act 2014 which codifies the measures passed in the budget.

Minister Noonan has been accused of going back on his word by opting to retain a controversial levy on private pensions. The four-year pension levy was supposed to finish at the end of this year but is now set to continue at different rates.

It is on target to raise €2bn from private retirement funds, with the money being used to create jobs. The levy has ended up reducing the size of pension funds of those who are yet to retire and has lowered the payments to those who are already retired. It has been applied at a rate of 0.6% in June of every year on the value of pension assets.

But now the minister has decided to increase the levy to 0.75% of the assets of pension funds for 2014 and then to impose it at 0.15% up to 2015. Mr Noonan said: “I am doing this to continue to help fund the Jobs Initiative and to make provision for potential state liability which may emerge from pre-existing or future pension fund difficulties.” This is a reference to a bill of up to €300m that the State faces for failing to put a rescue scheme in place for the Waterford Crystal workers, who suffered the double blow of their company going bust and the pension fund being insolvent.

Jerry Moriarty, of the Irish Association of Pension Funds, which represents trustees of pension funds, accused Mr. Noonan of breaking his word. He said: “The minister went out of his way last December to say that the pension levy, announced as part of the Jobs Initiative, would not be renewed after 2014. “Ten months later, he reverses that commitment, so it’s difficult to believe him now (when he says) the 0.15% levy scheduled for 2015 will only be that and will not be increased substantially in next year’s (Budget) speech.”

Mr. Moriarty said there was no justification for increasing the levy to 0.75% of all assets to collect €650m next year. This, he said, was well in excess of any of the job initiatives this levy was originally intended to fund. Associate director at KPMG Thalia O’Toole, said pension savers would be relieved that the minister had left in place the top rate of tax relief for people putting money into a pension.

However, she said: “But those yet to retire and who are saving for a pension will be negatively impacted by the higher than expected 0.75% levy in 2014 and the lower rate of 0.15% in 2015.”

She added that the measure was disappointing for pension savers. Mr. Noonan also announced measures which will mean that high-earner pensions of over €60,000 will no longer get tax relief. This is equivalent to a maximum pension pot of €2m at retirement, down from €2.3m at present.

Mr. Noonan has also introduced a range of different methods for assessing the size of a pension pot, for tax-relief purposes, for those who are in defined-benefit schemes. Other budget cuts that will affect pensioners are seemingly painful cuts to medical cards, household benefit packages and even death grants.

As a result of yesterday’s budget, now one in 10 pensioners over 70 will lose their full medical card and get a GP-only card in return. The pensioner’s telephone allowance, worth €114 a year, is also being abolished. And the death grant to help cover funeral costs, worth €850 to the families of the deceased, is being scrapped.

The Government is risking the wrath of the powerful “grey vote” for the first time since the Fianna Fail-Green Party coalition targeted medical cards five years ago. At the time of that decision the move mobilised older voters to come together in some of the largest, most effective protests seen here in years. These mass protests, which the Government may face again in the future meant that the Government was eventually forced to back down.

While the budget means that young families will get a boost as free GP care will now be provided to all children under the age of five in Ireland, the Government is cutting the number of full medical cards for the over 70s by tightening the income qualification thresholds.

As it stands, 350,000 over 70s have a full medical card, but as a result of this budget 35,000 of these will be downgraded to a free GP-only card. This decision will no doubt have a massive effect on those who genuinely rely on the full medical card. The income thresholds will be reduced from €600 a week to €500 a week for a single person, and €1,200 a week to €900 a week for a couple.

This is calculated to save €25m, implying that the cost of paying the drugs bill for pensioner’s works out at €700 each. Apart from the over 70’s, no changes to medical card income thresholds for other beneficiaries are expected.

Ministers Michael Noonan and Brendan Howlin were answering questions from the public on Today with Seán O’Rourke on RTE Radio One this morning were forced to deal with the reaction from people who have been most affected by yesterday’s announcement.

When asked “Did the Government finally get the nerve to hit older people after being too worried about taking a political hit in previous years?” Michael Noonan replied firmly “No we’re protecting older people”. He says the Government didn’t touch pensions or income tax credits for older people and that the basic package for pensioners was not affected. I’m not sure if pensioners would see it like that Minister Noonan.


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