THE EMPLOYERS’ GROUP IBEC has called on the government to allow people gain access to the savings built up in their voluntary pension funds – saying it could eventually provide an extra €1.24 billion in income.
The report, published this morning, claims that allowing people to gain access to their pension savings would mean an immediate tax windfall worth hundreds of millions – while also improving the welfare of Ireland’s banks.
The group suggests that employees should be permitted to access a maximum of 25 per cent of any voluntary pension funds they have set up in addition to an occupational pension.
IBEC believes that voluntary schemes are worth about €4 billion, while further personal pension schemes are worth €15 billion. If half of those pension holders withdrew the maximum 25 per cent of their funds, about €3 billion in funds could be released.
This would be subject to the usual income tax rate of 20 per cent, while IBEC believes about €600 million of the remaining cash would be channelled into debt repayment – ensuring that banks also benefited from the windfall.
The remaining €1.8 billion would then be eventually channelled into spending – which over time would improve VAT receipsts.
“Despite the pressure on the public finance, there are things that can be done to change consumer behaviour and support demand in the economy,” IBEC chief economist Fergal O’Brien said.
“During the boom years, some individuals invested in personal pension funds and AVCs, but have now seen their incomes fall significantly.
Allowing early release of a portion of these funds would enable such individuals to offset lost income with their savings, which are locked away, while at the same time providing a wider economic benefit.
The group does not propose allowing workers to take funds out of defined contribution and defined benefit schemes, however, as it says this would only serve to further threaten many schemes which are already in deficit, while weakening the likelihood of future provisions.