Anne Maher Chief Executive The Pensions Board 28 February 2006

Anne Maher

Chief Executive

The Pensions Board

28 February 2006

PENSIONS & SSIA SAVERSPENSIONS & SSIA SAVERS

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AgendaAgenda

Current Irish pension structure

National Pension Review

Pension opportunities for SSIA holders

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Current Irish Pension StructureCurrent Irish Pension Structure State universal basic benefit

• Either Old Age Contributory Pension or Old Age Non-Contributory Pension

• “Pay as you go” supported by National Pensions Reserve Fund

Private voluntary supplementary benefit• Includes occupational pension schemes, personal

pensions and Personal Retirement Savings Accounts (PRSAs)

• Funded on Defined Benefit or Defined Contribution basis• Covers 51.5% of workforce

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Current Irish Pension StructureCurrent Irish Pension Structure

Recent initiatives to increase private pension coverage

Personal Retirement Savings Accounts (PRSAs) Mandatory Employer Access National Pensions Awareness Campaign

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Current Irish Pension StructureCurrent Irish Pension Structure

Concern over private pension coverage

Concern over private pension adequacy• Defined Benefit scheme – deficiency problem• Defined Contribution scheme – low contribution levels

September 2006 statutory progress review brought forward to 2005

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NATIONAL NATIONAL PENSIONS PENSIONS REVIEW REVIEW

The ReportThe Report

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National Pensions ReviewNational Pensions Review

Report

Reviews agreed pension targets

Reviews current coverage and adequacy

Considers how to sustain Social Welfare pension

Considers options to meet targets

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Key messages

Significant cost increase for Social Welfare pension

Good pension provision costs a lot

Changes need to be made

Should build on existing good base

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National Pensions ReviewNational Pensions ReviewSocial Welfare Pensions

Significant increase in cost

Projected cost of pensions as a % of GNP

2006 2016 2026 2036 2046 2056

3.0% 3.7% 4.9% 6.5% 8.7% 10.1%

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Social Welfare Pension Options

Increase retirement age

PRSI / Taxation increases

Increase payment to NPRF

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Supplementary Pensions

58.6% of over 30s in the workforce have supplementary pension coverage

51.5% of the total workforce have supplementary pension coverage

No progress towards adequacy target

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Supplementary Pension Options

Enhancements to Voluntary System

Mandatory Pensions

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Recommendations for Immediate Implementation

SSIA style tax delivery for PRSAs

Higher rate tax for all personal pension contributors

Reduced Standard PRSA regulation

Incentives on SSIA proceeds

Retirees option to defer Social Welfare pension

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Areas Identified for Further Consideration Include:

• Progress review in 2008 • Research on women’s coverage• Regular projection of pension costs• Automatic enrolment• Mandatory pension provision• Pensions awareness campaigns• State retirement support

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Pension Opportunities for SSIA Pension Opportunities for SSIA HoldersHolders

Tax reliefs for pension contributions• Under 30 = 15% of earnings• 30 – 39 = 20%• 40 - 49 = 25%• Over 50 = 30%• Over 55 = 35%• Over 60 = 40%

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Pension Opportunities for SSIA Pension Opportunities for SSIA HoldersHolders

Transfer of SSIA monies into RACs/ PRSAs/ AVCs by lower income holders:• €1 for every €3 transferred• Subject to maximum bonus of €2,500• Waiver of exit tax• Applies to SSIA holders taxable at 20% or exempt from

tax and subject to income limit of €50,000

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What Happens Next?What Happens Next?

Government are considering response to National Pensions Review

Pensions is to be discussed at Partnership talks Minister Brennan

• Has asked Pensions Board to do work on mandatory pension option

• Is holding a Pensions Forum to stimulate public debate and move issue forward

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In ConclusionIn Conclusion New transfer option for SSIAs to pensions is

attractive for those on lower tax rate Pension tax reliefs make pension investment a

strong option for all SSIA holders who want to:• Reinvest• Continue savings habit

Ireland needs changes in pension structure

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Anne Maher Chief Executive The Pensions Board 28 February 2006

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