We found ‘costs and changes’ were typical discussion points when meeting trustees and employers especially in the latter part of 2013 before the much anticipated Budget 2014 was delivered by Minister for Finance, Michael Noonan.
Change from Defined Benefit to Defined Contribution: ‘A New Strength’ conference hosted by Irish Life
A change from defined benefit to defined contribution gathered momentum in 2013 with many high profile companies and banks making that move. We see this trend continuing into 2014 as more and more employers seek the certainty of cost that a defined contribution plan provides.
This issue was the main focus of a conference we hosted in November in the Convention Centre Dublin. The conference addressed the provision of employee pension benefits in the face of rising costs, regulatory changes and employees' retirement expectations. Speakers at the conference addressed the current Irish pension scene, and also highlighted the innovative solutions being developed by Irish Life to help employers, trustees and advisers to overcome the current challenges they face.
To find out more about the conference and the presentations held visit www.irishlifeconferences.com
Pension Levy
Despite an assurance in last year's Budget that the Pension Levy was to be abolished after 2014, the Minister for Finance announced that he is introducing an additional levy of 0.15% which results in an overall levy of 0.75% to apply in 2014 and then 0.15% in 2015.
There is a real concern that it will continue into 2016 and beyond. A continued levy will add further pressure on costs, especially on defined benefit schemes. The pension industry must continue to lobby the Minister on this, on behalf of pension scheme members, to ensure it ends in 2015.
Budget 2014
No change to the tax relief rates was welcomed, but the expected change to the Standard Fund Threshold (SFT) from €2.3m to €2m from 1st January 2014 was introduced. For defined benefit schemes, there will be new age-related valuation factors for SFT purposes for pension rights accrued after 1 January 2014.
As the current treatment of lump sums in excess of the lifetime tax free limit of €200,000' (from December 2005) is tied to the Standard Fund Threshold (SFT), the next €375,000 of a lump sum entitlement currently subject to standard rate income tax only will reduce to €300,000 due to the reduction in the SFT from 1st January 2014.
Pensions Bill
Details of a Pension Bill was announced on 19th November 2013 around changes to the priority order in the event of a defined benefit plan winding up whereby existing and deferred members will receive a greater share of the benefits and some pensioners will have their benefits reduced. It also aims to provide protection for members in the event of the employer and/or the pension scheme becoming insolvent.
We will continue to keep clients abreast of any changes that may effect them through our monthly e-newsletter and trustee meetings in 2014.
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