Levy on civil service pension payments illegal?

patslatt

Well-known member
Joined
Apr 11, 2007
Messages
13,637
Is it possible the government is not being honest with the public on the proposed levy on civil service pensions which in my layman's opinion will be thrown out of court on the grounds of property rights? Or is it grasping at straws to raise revenue?

Even if the levy is eventually declared illegal as I expect,meanwhile it would serve a useful political purpose by deflecting public attention from a budget that pays gold plated pensions to many retired civil servants while cutting social welfare and widening the tax net to low incomes.

On the property rights issue,the levy on civil service salaries was justifiable as a necessary contribution towards the future cost of pensions,though this contribution was way less than the full actuarial contribution for the top half of civil service salaries.

Can such a levy be retroactively imposed on existing pensions? Retroactive taxes are considered outrageous by tax planners but that doesn't mean that they are illegal. Once pension payments start,presumably the government has entered into a contract to keep the payments going without a further contribution from the pensioner. If you buy an annuity from an insurer with a lump sum,the insurer has no legal right to demand further payments from you and shouldn't the same law apply to the government?

There is also the issue of singling out certain classes of people for discriminatory taxation. A levy imposed on civil service pensions presumably should apply to all pensions and all earned incomes,or none. In Brazil,the Lula government imposed a levy on public sector pensions which take a huge proportion of the federal budget but the Supreme Court which presumably would pay the levy on retirement declared it illegal.
 
Last edited:


Kevin Doyle

Well-known member
Joined
Jan 9, 2007
Messages
11,017
Is it possible the government is not being honest with the public on the proposed levy on civil service pensions which in my layman's opinion will be thrown out of court on the grounds of property rights? Or is it grasping at straws to raise revenue?

Even if the levy is eventually declared illegal as I expect,meanwhile it would serve a useful political purpose by deflecting public attention from a budget that pays gold plated pensions to many retired civil servants while cutting social welfare and widening the tax net to low incomes.

On the property rights issue,the levy on civil service salaries was justifiable as a necessary contribution towards the future cost of pensions,though this cost was way less than the full actuarial contribution for the top half of civil service salaries.

Can such a levy be retroactively imposed on existing pensions? Retroactive taxes are considered outrageous by tax planners but that doesn't mean that they are illegal. Once pension payments start,presumably the government has entered into a contract to keep the payments going without a further contribution from the pensioner. If you buy an annuity from an insurer with a lump sum,the insurer has no legal right to demand further payments from you and shouldn't the same law apply to the government?

There is also the issue of singling out certain classes of people for discriminatory taxation. A levy imposed on civil service pensions presumably should apply to all pensions and all earned incomes,or none. In Brazil,the Lula government imposed a levy on public sector pensions which take a huge proportion of the federal budget but the Supreme Court which presumably would pay the levy on retirement declared it illegal.
Dear oh dear, firstly, the coming cuts to PS pensions will simply be the application of the cut in pay to the linked pension, an automatic step which should have occurred when the PS received its last pay cut but was blocked by the DoF.

Secondly, the 'pensions levy' is not nor could be considered illegal, it is a charge imposed on income. The fact that is has actually nothing to do with Pensions and is merely a thinly veiled pay cut is irrelevant. There are examples of discriminatory taxation everywhere, in fact the IMF has just proposed a 5% tax cut based on gender.
 

Keith-M

Well-known member
Joined
Jul 24, 2007
Messages
15,668
Website
www.allkindsofeverything.ie
On what grounds could it be illegal? These cuts have been made in other countries without any issue.

And no this isn't a "pay cut" either. Pay is something your earn for your current work, a pension is an entitlement. That's why there are ministries in other countries that cover "pay AND pensions".
 

Kevin Doyle

Well-known member
Joined
Jan 9, 2007
Messages
11,017
And no this isn't a "pay cut" either. Pay is something your earn for your current work, a pension is an entitlement. That's why there are ministries in other countries that cover "pay AND pensions".
The pensions levy is a pay cut. Everyone bar you excepts this. You've also managed to contradict yourself as well.
 

Barnacle

Well-known member
Joined
Sep 15, 2009
Messages
854
The Pension Levy in its current form that is charged to existing PS employees would be illegal as the legislation surrounding it prevents this being applied to existing public servants.

However, last year an amendment was made to the Social Welfare Act in 2009 (which amended Section 50 of the Pension Act 1990) which allows existing pensions in payment to be charged for any deficit in the scheme. Prior to this, charges to pension schemes could only be made to Active Members, this amendments allowed charges to be made to both Active & Non-Active Members which includes existing pensions in payment and deferred members.

It is possible that this legislation or an adaptation of same could be applied to existing PS Pensioners.

Social Welfare And Pensions Act 2009, Section 17
 
Last edited:

Barnacle

Well-known member
Joined
Sep 15, 2009
Messages
854
Secondly, the 'pensions levy' is not nor could be considered illegal, it is a charge imposed on income. The fact that is has actually nothing to do with Pensions and is merely a thinly veiled pay cut is irrelevant. There are examples of discriminatory taxation everywhere, in fact the IMF has just proposed a 5% tax cut based on gender.
If this was a charge to income (a tax) and not specifically for the purpose of pension payment it would be considered illegal as you would be singling out one type in society to pay such tax.
 

patslatt

Well-known member
Joined
Apr 11, 2007
Messages
13,637
The law of contracts could apply

The Pension Levy in its current form that is charged to existing PS employees would be illegal as the legislation surrounding it prevents this being applied to existing public servants.

However, last year an amendment was made to the Social Welfare Act in 2009 (which amended Section 50 of the Pension Act 1990) which allows existing pensions in payment to be charged for any deficit in the scheme. Prior to this, charges to pension schemes could only be made to Active Members, this amendments allowed charges to be made to both Active & Non-Active Members which includes existing pensions in payment and deferred members.

It is possible that this legislation or an adaptation of same could be applied to existing PS Pensioners.

Social Welfare And Pensions Act 2009, Section 17
Once payments commence on pensions,that would imply a contract is in force,not a gift that can be withdrawn or reduced. I understand that if a man voluntarily pays a single woman a regular child support fee for his child,even if they never lived together this fee could be considered a contractual right.
 

Barnacle

Well-known member
Joined
Sep 15, 2009
Messages
854
Once payments commence on pensions,that would imply a contract is in force,not a gift that can be withdrawn or reduced. I understand that if a man voluntarily pays a single woman a regular child support fee for his child,even if they never lived together this fee could be considered a contractual right.
Pension under DC and Personal Schemes are contractual as a specific fund is transferred from which an agreed periodical payment is made. The problem with DB Schemes is that the cost to provide the benefits are not transferred out therefore benefits are paid from the current fund. This amendment to the SWA was made specifically to deal with this problem as this cost to the fund is causing a deficit. The act does not seem specific as to how this charge can be made.
 
Last edited:

patslatt

Well-known member
Joined
Apr 11, 2007
Messages
13,637
Pension under DC and Personal Schemes are contractual as a specific fund is transferred from which an agreed periodical payment is made. The problem with DB Schemes is that the cost to provide the benefits are not transferred out therefore benefits are paid from the current fund. This amendment to the SWA was made specifically to deal with this problem as this cost to the fund is causing a deficit. The act does not seem specific as to how this charge can be made.
Defined benefit/final salary pension plans in companies are funded based on actuarial calculations of future benefits and investment returns. In contrast,the government's plan was pay as you go until Finance Minister McCreevy set up the national pension fund with a contribution of around 1% of GNP if I remember correctly but this is not actuarially determined.
 

Kevin Doyle

Well-known member
Joined
Jan 9, 2007
Messages
11,017
If this was a charge to income (a tax) and not specifically for the purpose of pension payment it would be considered illegal as you would be singling out one type in society to pay such tax.

It is a charge on income (pay cut) disguised as a levy paid toward pensions. The charge is levied on non contributory income such as overtime so how can it be considered specifically for the purpose of pension payment? It is also applied to staff who will receive no DB Pension other that the State OAP.

Dress it up anyway you wish but the Pensions levy is a paycut.
 

Barnacle

Well-known member
Joined
Sep 15, 2009
Messages
854
It is a charge on income disguised as a levy paid toward pensions to avoid any legal issues although tax discrimination occurs elsewhere. The charge is levied on non contributory income such as overtime so how can it be considered specifically for the purpose of pension payment? It is also applied to staff who will receive no DB Pension other that the State OAP.

Dress it up anyway you wish but the Pensions levy is a paycut.
Whether you call it a Pension Levy or a Pay-Cut makes no difference. The fact is the Scheme costs too much to administer, payment had to come from somewhere in the form of a charge. The main problem with the scheme was that it was never funded, provisions were not made to pay the pensions. If they had have made everyone pay 5% years ago and the fund was ring-fenced including the State Contribution, the scheme would not be in such a deficit now. The mistakes were made years ago and now they are trying to fix it. I do agree that it is incorrect to charge this to non-pensionable income, this is a bit of an insult.

If someone does not receive a benefit for this levy, it is then repaid. Are you saying that it is charged to someone who is not a member of any PS Scheme?
 

Barnacle

Well-known member
Joined
Sep 15, 2009
Messages
854
Defined benefit/final salary pension plans in companies are funded based on actuarial calculations of future benefits and investment returns. In contrast,the government's plan was pay as you go until Finance Minister McCreevy set up the national pension fund with a contribution of around 1% of GNP if I remember correctly but this is not actuarially determined.
And this is where the problem is. On the NPRF, I think only 1/3rd was supposed to go towards PS pension, no idea how this was calculated but I would doubt if it was an actuarial calculated cost. Not all DB schemes fund is transfered out to pay the pension but you are right they are funded unfortunately many are underfunded.
 

Cruffan

Active member
Joined
May 27, 2010
Messages
135
And this is where the problem is. On the NPRF, I think only 1/3rd was supposed to go towards PS pension, no idea how this was calculated but I would doubt if it was an actuarial calculated cost. Not all DB schemes fund is transfered out to pay the pension but you are right they are funded unfortunately many are underfunded.
IIRC 2/3rds of the NPRF is assigned to help fund PRSI Contributory Old Age Pensions from 2024 which also has a Pay-As-You-Go funding model.
 

Barnacle

Well-known member
Joined
Sep 15, 2009
Messages
854
IIRC 2/3rds of the NPRF is assigned to help fund PRSI Contributory Old Age Pensions from 2024 which also has a Pay-As-You-Go funding model.
:) Thanks for that. Couldn't remember the exact make up of the fund.
 

Watcher2

Well-known member
Joined
May 2, 2010
Messages
34,340
Whether you call it a Pension Levy or a Pay-Cut makes no difference. The fact is the Scheme costs too much to administer, payment had to come from somewhere in the form of a charge. The main problem with the scheme was that it was never funded, provisions were not made to pay the pensions. If they had have made everyone pay 5% years ago and the fund was ring-fenced including the State Contribution, the scheme would not be in such a deficit now. The mistakes were made years ago and now they are trying to fix it. I do agree that it is incorrect to charge this to non-pensionable income, this is a bit of an insult.

If someone does not receive a benefit for this levy, it is then repaid. Are you saying that it is charged to someone who is not a member of any PS Scheme?
I have been told that that is correct.
 

laidback

Well-known member
Joined
Jun 3, 2009
Messages
1,134
The pension levy is indeed a paycut but because it is termed a pension levy then pension tax relief had to be given on it. This made the paycut more unfair as higher paid public servants got tax relief at the top rate and lower paid ones, got relief or standard rate or in some cases tax relief did not apply as they paid no tax anyway as they had one low income for a family.

I know of a student who did a few weeks cleaning work at Trinity College and the pension levy was deducted. I understand it is being deducted from anyone who does any state work regardless of whether they are getting a pension at some stage. They may now be getting some of the levy back (not sure about this0 but think of the unnecessary admin costs deducting something, when some will be paid back later.
 

Barnacle

Well-known member
Joined
Sep 15, 2009
Messages
854
I have been told that that is correct.
Which makes no sense because the legislation states that the Pension Levy can only be applied to someone who is a member of a PS Pension Scheme. Now I am not disputing someone's claim but would love to know some more specifics. :confused:
 

Watcher2

Well-known member
Joined
May 2, 2010
Messages
34,340
Which makes no sense because the legislation states that the Pension Levy can only be applied to someone who is a member of a PS Pension Scheme. Now I am not disputing someone's claim but would love to know some more specifics. :confused:
Me too. I think the whole country is confused, about everything.

Anyway, not to derail the thread, I thought it strange but not beyond FF to word the legilsation to suit their own needs. I know some union members wanted to take a case to the courts to challenge the legislation on such issues that I have mentioned above but the union refused to fund a case.
 


New Threads

Popular Threads

Most Replies

Top