A levy of 0.6pc imposed on pension funds to pay for some of the measures announced in yesterday’s Jobs Initiative has produced an uncalled for “quasi-hysterical” reaction, according to Minister for Finance Michael Noonan.

The effect the levy will have on pension funds has been “exaggerated” by the pensions industry, Noonan told reporters at a press conference following the Dáil announcement of the much-anticipated Jobs Initiative.

He said the Government were “pulling back a very small proportion” of major tax reliefs that the funds have enjoyed in previous years. It will take very little from the value of the funds, he said.

He criticised the “quasi-hysterical” reaction, pointing out that the levy did not have to come from the funds themselves but could be absorbed by the industry which has recovered well in the past year.

He said fees charged on funds in Ireland were larger than comparative charges in the UK and therefore there was room for movement.

The new levy has been implemented to help in “restarting our economy”, Noonan explained, which would only be a good development for the pensions industry.

Companies in the pensions industry highlighted their disappointment at the levy on pensions last night.

“While we are all conscious of the critical challenges facing the country and the importance of job creation in particular, I am disappointed that ordinary workers trying to save for retirement are being targeted to help fund this jobs initiative,” said Irish Life chief executive Gerry Hassett.

He added, “Just a few years ago there was a broad consensus that we needed to plan now to avoid a pensions’ time bomb in this country. Unfortunately every policy announcement on pensions since that time has undermined confidence in retirement planning and has contributed to an escalating pensions’ problem. Clearly we have to deal with today’s crisis in the public finances….but we must avoid creating an even bigger fiscal crisis for the next generation in the process.”

Patrick Cosgrave, a director at Deloitte Pensions and Investments commented, “The pensions levy will obviously not be welcomed by the pensions industry, but perhaps is understandable in the current economic context. Only by securing a productive economy and high employment can we expect to enjoy future pensions.”

However, he added, “The most significant impact however is the negative signal that it sends as to the security of pension savings, and may well undermine many individuals’ willingness to save for their retirement. It may also be of interest to understand how the levy will impact, if at all, employers and Irish members of pension schemes established in other EU jurisdictions.”

IBEC’s reaction was mixed, stating the measures in the initiative were a positive and decisive way to get people back to work but added that the decision to fund the move through a levy on pension funds will have serious consequences for defined benefit pension schemes, many of which are already in significant deficit.

It is expected that about €450m will be garnered annually from the levy.