There has been a lot of talk of how it is impossible to reduce pensions in payment and how the only way to resolve the AIB (and other bank) pensions issue is to request a voluntary reduction from the pensioners. Not actually true.
The current programme for government states that the government will cap tax payers subsidies to all pensions that pay an income in retirement of more than 60,000
this change is widely expected in the budget and will generate c380-400M in savings
the issue with pensions in payment (AIB etc) can be handled using the same principle -
1) pensions that have been secured in the form of an annuity can't be "reversed" but taxation changes can be made such that annuities in payment in excess of 60,000 carry an additional tax charge or levy. This would apply at source, could be implemented in the budget at no cost to the taxpayer and would generate substantial additional tax revenues
2) pensions that are being paid from a pension scheme could also be targeted in this manner.
3) when a pension scheme is being wound up (as the AIB scheme arguably should have been as it was clearly insolvent !!) the pensions in payment are prioritised. This means that already retired people are treated differently from those pre-retirement. There are loads of good reasons for that - however in the current context and given the move to a 60k cap on tax payer subsidised pension plans, a change to the priority order should be introduced which protects the first 60k of pensions in payment only and the remainder is treated in the same was as the pre-retirement people. Again a simple budget announcement would achieve this result.
4) approved retirement funds (ARF) are often used now rather than buying a pension - they give flexibility, ownership, control etc - at the moment 5% is deemed to have been withdrawn from an ARF each year and income taxes are payable on this whether the ARF holder actually draws down that 5% or not. Given that they will subsequently pay income taxes on any drawdowns, the majority will draw down at least 5% each year to avoid double taxation. Where the ARF is >2M then this rate is upped to 6%.
A simple change here would be to continue to operate the 5% deemed withdrawal on ARFs of up to €1.2M. I'd bin the 6% rate as it is an unnecessary complication. On the portion of an ARFs > 1.2M I'd operate a sliding scale of deemed withdrawal. 6% on the portion up to €2M, 10% on the portion between 2M and 5M and 20% on the amount over 5M. I'd also apply the same additional tax charge on ARF withdrawals over 60k (as per that outlined in 1 above). The measure could be implemented in the budget and again would have no implementation cost for the exchequer and would immediately deal with the issue of big "pension pots" for retirees.
All simple - all can be done immediately and would generate significant funds without cost to the exchequer to implement. Its about will to tackle the issue rather than means to tackle it !