No marriage equality for pensions (Part 3)

In 1995 Prof William Binchy, arguing for a No vote at the Anti-Divorce Campaign’s final press conference, warned that “the proposed amendment would remove constitutional protection from the first family in favour of the second partner following a divorce”. He added that “the amendment would reward deserters, leaving abandoned wives in a perilous financial position;” allowing these deserters to “scoop the pool of the family assets”.

In my two previous blogs on marriage equality for pensions, we saw how the tax legislation in effect has worked to pander to this agenda by curtailing the ability of a divorcee to make pension provision for his or her new family.

20 years after Prof Binchy’s warning and a couple of months before the Marriage Equality Referendum we had a Dail question put to the Minister for Finance asking for his views on the right to build up pension provision for the second family. The reply we got back gives a revealing insight into the undying reluctance in some circles to accept marriage breakdown as a fact which must be provided for by law.

In defence of the lack of access to fund a pension for another family a number of points were made:

  1. Tax relief on private pension provision represents a cost to the Exchequer which must be curtailed.
  2. The regime of imposing a cap on pensions discourages the building up of large pension funds by clawing back tax relief.
  3. The provision which has the effect of limiting pension provision for second families was introduced “as an anti-avoidance measure” designed to prevent divorcees from availing of “further tax relief in building their part of the pension fund back up”.

This defence is lacking for the following reasons:

  • Pensioners pay tax when the pension is paid to them. Therefore, the tax relief granted when they contributed to the pension can more correctly be said to be a tax deferral.  The Exchequer will get its money, only later.
  • In the longer term, private pension saving lessens the burden on the Exchequer of future welfare payments for retired people.
  • The pensions cap does not target excessive contributions; it works to put a 70% tax on growth in the pension. The only thing it “discourages” is careful fund management.

The worrying thing is the apparent disregard for the 15th amendment to the Constitution and the acceptance of marriage breakdown as meriting legal protection. Yes, maybe there is a (short term) cost to the Exchequer of putting the second family on equal footing with the first. However, it is not the job of the Department to fix the consequences of the opinion of the people who voted for the Government to make legal provision for marriage breakdown. It only has to observe the Constitution.

Tommy Nielsen

*Please note this content is the view of the author and not of Independent Trustee Company

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