Pensions expert calls proposal to invest in SMEs 'off the wall'

Charlie Weston Personal Finance Editor

A PROPOSAL from the Irish Tax Institute that pension funds would be forced to put 5pc of their assets into Irish small firms amounts to "confiscation of private pension assets", a leading pensions expert said. 

A PROPOSAL from the Irish Tax Institute that pension funds would be forced to put 5pc of their assets into Irish small firms amounts to "confiscation of private pension assets", a leading pensions expert said. 

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Pensions expert calls proposal to invest in SMEs 'off the wall'

Independent.ie

A PROPOSAL from the Irish Tax Institute that pension funds would be forced to put 5pc of their assets into Irish small firms amounts to "confiscation of private pension assets", a leading pensions expert said. 

The Irish Tax Institute said the proposal would create jobs as it would help smaller companies get finance. 

But leading actuary Tony Gilhawley said the idea was "off the wall". 

Mr Gilhawley, director of actuarial firm Technical Guidance, added: "It amounts to a further confiscation of private pension assets of 5pc, in addition to the proposed 0.5pc a year levy. 

"Private pensions are truly under attack from all sides.  Will public service workers be required to contribute 5pc a year of their salaries to this SME (small and medium sized) fund?  I doubt it." 

The Irish Tax Institute, the leading professional body for taxation affairs in Ireland, estimated that its proposal could raise up to €3.6bn in funding for smaller firms over a five-year period. 

"Under this proposal, Irish pension funds would be enabled (and possibly even required), to invest a minimum of their asset allocation in the target group," a jobs strategy document submitted by the tax practitioners to the Government states. 

The document also called for a reduction in the lower rate of value added tax and lower pay related social insurance (PRSI) for the lower paid, two proposals which are part of government policy. 

Higher

The institute also questioned the fact that the self-employed are now paying higher rates of income tax than those who are employed. 

When income tax, levies and PRSI are added together, the self-employed face a rate of 55pc on their higher levels of income.  This compares with a marginal rate of 52pc for those in employment.  There is no scope for introducing higher levels of income tax. 

"The institute believes that, at these levels, the taxation of income now exceeds the 'tipping point' beyond which there is no economic benefit to government in raising the top rates any higher," it said. 

Meanwhile, employers' body IBEC has proposed loan guarantees for SMEs.  It also wants a new national graduate internship programme and a work placement programme for the unemployed. 

There should be major reform of state employment services and the social welfare system to ensure they are fully integrated and work together to get people back to work, IBEC said.  It also called for a major overhaul of the wage rules that set minimum terms and conditions in many sectors.