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

2 Agenda  Background  Key Messages  Current Position  Policy Options  Recommendations  What Happens Next? 2

3 Background  National Pensions Policy Initiative  Subsequent Progress and Issues  Statutory Review required by September 2006  2006 Review brought forward to 2005 as the “National Pensions Review”. 3

4 Background National Pensions Review Report  Reviews agreed pension targets  Reviews current coverage and adequacy  Considers how to sustain State pension  Considers options to meet targets 4

5 Key Messages  Significant cost increase for State pension  Good pension provision costs a lot  Changes need to be made  Should build on existing good base 5

6 Current 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 6

7 Current Position – State Pension  Significant increases in Social Welfare cost  Projected cost of first pillar pensions as a % of GNP %3.7%4.9%6.5%8.7%10.1%

8 Current Position – State Pension  Projected ratio of those at work to those aged over Nos. at work (000) 2,0012,2132,268 2,1702,125 Aged over 65 (000) ,1051,4031,532 No. at work per person aged over

9 Current Position – State Pension  Projected life expectancy at Men Women

10 Policy Options – State Pension  Options to sustain State pension module Increase retirement age PRSI/Taxation increases Increase payment to NPRF 10

11 Current Position – Supplementary Pension  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 11

12 Policy Options – Supplementary Pension  Enhancements to Voluntary System  Mandatory Pensions 12

13 Policy Options – Supplementary Pension 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 13

14 Policy Options – Supplementary Pension 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 14

15 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 15

16 Issues Identified for Further Consideration  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 16

17 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 17

18 In Conclusion  National Pensions Review is ‘work in progress’ and  Must lead to change 18