The National Pensions Review: Policy Options and Recommendations Anne Maher Chief Executive The Pensions Board 29 March 2006.

The National Pensions Review:The National Pensions Review:

Policy Options and Policy Options and RecommendationsRecommendations

Anne MaherChief Executive

The Pensions Board29 March 2006

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AgendaAgenda

Background Key Messages Current Position Policy Options Recommendations What Happens Next?

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BackgroundBackground

National Pensions Policy Initiative 1996 - 1998

Subsequent Progress and Issues

Statutory Review required by September 2006

2006 Review brought forward to 2005 as the “National Pensions Review”.

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BackgroundBackground

National Pensions Review Report

Reviews agreed pension targets

Reviews current coverage and adequacy

Considers how to sustain State pension

Considers options to meet targets

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Key MessagesKey Messages

Significant cost increase for State pension

Good pension provision costs a lot

Changes need to be made

Should build on existing good base

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Current Position - TargetsCurrent Position - Targets

Targets reviewed

• 50% pre-retirement income replacement

• 34% GAIE State pensions

• 70% over 30s in workplace supplementary pension coverage

Targets broadly accepted

Most believe agreed targets would not be met without change

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Current Position – State Pension Current Position – State Pension

Significant increases in Social Welfare cost

Projected cost of first pillar pensions as a % of GNP

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2006 2016 2026 2036 2046 2056

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

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Current Position – State PensionCurrent Position – State Pension

Projected ratio of those at work to those aged over 65

88

2006 2016 2026 2036 2046 2056

Nos. at work (000) 2,001 2,213 2,268 2,268 2,170 2,125

Aged over 65 (000)

464 620 844 1,105 1,403 1,532

No. at work per person aged over

65

4.3 3.6 2.7 2.1 1.5 1.4

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Current Position – State PensionCurrent Position – State Pension

Projected life expectancy at 65

2006 2016 2026 2036 2046 2056

Men 16.0 17.6 19.2 20.6 21.3 22.0

Women 19.4 20.9 22.4 23.9 24.6 25.3

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Policy Options – State PensionPolicy Options – State Pension

Options to sustain State pension module

• Increase retirement age

• PRSI/Taxation increases

• Increase payment to NPRF

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Current Position – Supplementary Current Position – Supplementary PensionPension

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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Policy Options – Supplementary Policy Options – Supplementary PensionPension

Enhancements to Voluntary System

Mandatory Pensions

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Policy Options – Supplementary Policy Options – Supplementary PensionPension

Enhancements to Voluntary System

All Board recommended immediate enhancements to current system

All Board believe enhancements would achieve improvements

Some believe enhancements would achieve targets

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Policy Options – Supplementary Policy Options – Supplementary PensionPension

Mandatory Pension Provision

Considered issue in general rather than design system

There are many differing views among the Board

Could be summarised as an issue of cost versus certainty

Some Board members believe mandatory should be considered urgently

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Recommendations for Immediate Recommendations for Immediate ImplementationImplementation

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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Issues Identified for Further Issues Identified for Further ConsiderationConsideration

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 Funding Standard for DB Schemes Pension Protection Fund Long Term Care

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What Happens Next?What Happens Next? Finance Bill 2006 introduces

• incentive for transfer of SSIA monies to pensions by lower income holders, and

• increased tax limits for pension contributions for over 55s

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

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In ConclusionIn Conclusion

National Pensions Review is ‘work in progress’

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Must lead to change

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