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The Universal Social Charge, known as the USC, is a tax on income that was introduced in emergency conditions in 2011 and justified as temporary, but then left in place for 15 years. It cannot now be assessed purely on its original purpose.
It has to be judged against the present reality which is that the State is no longer in financial crisis. A crisis tax does not become legitimate simply because it has lasted a long time.
On 19 May, the Minister for Finance, Simon Harris, told the Dail that “the USC is projected to total approximately €5.9 billion in 2026” to add to the Exchequer. Against tax revenues of around €120bn to €130bn, that amounts to 4% to 5% of the total.
Weeks before the 2016 General Election, Simon Harris as a Minister of State declared: “Our absolute commitment going into this election is the abolition of the hated USC.” That didn’t happen and few believe that it will happen because as he told the Dail last month it provides “a steady income to the Exchequer”.
The USC is payable on income from work and pensions over €13,000 a year but it is not payable on the state/old age pension which is currently over €15,000 for an individual with an additional €10,000 for an adult dependent. Those whose pension is made up of the state pension and a supplementary occupational pension are exempt from paying USC on the state pension component.
In contrast, those whose pension comprises only an occupational pension get no exemption and pay the full USC. That is a discriminatory anomaly between these two pension sources. It is discrimination against occupational pensioners and is unfair and unjust.
There must be equity in treatment irrespective of the source of a pension.
The Minister for Finance also took €2.4 billion in taxation through the pensions levy on occupational pension funds between 2011-2015 when most of these were in deficits that led to caps or cessation of increases across the commercial semi-state sector where pensions were devalued and remain so.
In October 2011, the Fianna Fail Spokesman on Finance, Michael McGrath, claimed the pension levy was “a grossly unfair imposition” on the savings of current and future pensioners. In November 2015, he accused the government of “raiding the savings of those who have put money aside for their retirement… The raid on private pensions has added to the difficulties of many pension schemes already struggling to pay the benefits pensioners are entitled to”.
The Pensions Ombudsman, Paul Kenny, described the levy in 2014, which reaped €743m at its height that year, as “legal but not necessarily fair”. Michael McGrath, as Minister for Finance in October 2023 said that he had “no plans to repay the levies raised on private pension funds”. A good example that even Opposition TDs cannot be trusted in the statements they make.
So, in reality occupational pensioners were hit twice by the government in its “raid” on pension funds…some of which had to be closed to new members or closed down altogether. Various pensioner groups have been seeking to have the USC deductions being made from occupational pensions ceased so as to remove the anomaly with the state pension. Other groups are seeking the cessation of the USC altogether. However, the Minister for Finance is holding firm choosing instead to tinker around with adjustments in rates.
These pensioners are calling for equity in the treatment of pension income for tax purposes irrespective of the source. As the Dept of Social Protection begins consideration of its proposals for Budget 2027, pensioners are upping their pressure to have the anomaly removed. They are lobbying the Ministers for Social Protection and for Finance. Emails and letters are being sent to Dara Calleary and to Simon Harris as well as to local TDs and Senators.
Ministers would be wise to think about the ‘grey vote’ who consistently boast high voter turnout and wield significant influence over elections. This large cohort have become increasingly freewheeling in their voting intentions, often moving away from strict historical party loyalties to vote based on immediate campaign offerings.
Matt Moran is an author and writer living in Co. Cork. He is involved in a number of pensioner associations that advocate for the protection of pensions and the welfare and rights of pensioners.
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