Finance Bill: End of the 1% Levy on Pensions

Yesterday’s Finance Bill heralded the scrapping of the 1% levy on pension payments, which came into force last June.  This is a welcome development and highlights the absurdity of the original levy.

I cannot understand why the Minister decided last year to discourage taxpayers from saving for their old age,  especially at a time when we are told we have a serious national pensions deficit.

Retirement fund

It appears from the Finance Bill that the 1% levy on life assurance payments will stay in place, at least for another year. Again, I am at a loss to understand why the Minister deems it fit to impose a tax on people who are prudent enough to put a few euro into a life assurance policy, to protect their family if they happen to die unexpectedly.

Last year’s Finance Bill included both the new 1% life and pensions levy, and also a hike in the insurance levy from 2% to 3%.  Unfortunately the insurance levy is unchanged this year. That said, it might be more than a little optimistic to pray for its demise.

Older readers will recall that the previous 2% levy was introduced as a ‘temporary’ measure in the early 1980s, in order to finance the State rescue of the stricken Allied Irish Bank.

It is ironic that, not only is the levy still in place a generation later, but it is now 50% higher, just as Nama is in the process of bailing out the banks once again! Plus ca change…