A glaring anomaly in the way the cost of pensions is calculated in the public and private sectors has been revealed in a new study. It is further evidence of the need to put workers in both sectors on a more even footing when it comes to pension provision.

The study by the Association of Pension Trustees of Ireland shows private sector workers and their employers would have to spend millions of euro to earn the kind of retirement benefits paid to our senior politicians, judges and public servants. A notable feature of the study is the finding that the pensions paid to State employees are valued by the Revenue Commissioners at considerably less for tax purposes than identical pensions paid to people in the private sector.

For instance a TD retiring at the age of 60 on full benefits after 20 or more years service will get a tax free lump sum of €135,000 and a pension of €45,000 a year. The cost of this pension on the open market would be €2.38 million but the Revenue Commissioners calculate the value of a Dáil deputy’s pension at €1.48 million. The critical point here is that pension pots valued at €2 million or more are subject to a “super tax” rate of 70 per cent. A TD is treated as being well under this threshold but a private sector employee with the same pension entitlements is over the limit and liable to “super tax”.

Read full content here: Irish Times