NATIONAL PENSIONS REVIEW Report of the Pensions Board Launch of Report by Minister Seamus Brennan TD on 17 January, 2006

2 Agenda  Background/Overview  Targets / Current position  Options  Related Issues  Recommendations 2

3 Background  Statutory Review not later than September 2006  Minister’s request (February 2005)  Final Report (October 2005) 3

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5 Overview Report  Reviews agreed pension targets  Reviews current coverage and adequacy  Considers how to sustain Social Welfare pension  Considers options to meet targets 5

6 Overview 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 6

7 Targets  Targets reviewed 50% pre-retirement income replacement 34% GAIE Social Welfare pensions 70% over 30s in workplace supplementary pension coverage  Targets broadly accepted  Most believe agreed targets would not be met without change 7

8 Current Position – Social Welfare  2005 Old Age (Contributory) Pension is € per week 32% of 2004 GAIE of € per week  2006 Old Age (Contributory) Pension is € per week 33% of estimated GAIE of €588 per week 8

9 Current Position – Social Welfare  Significant increase in Social Welfare cost  Projected cost of first pillar pensions as a % of GNP %3.7%4.9%6.5%8.7%10.1% 9

10 Current Position – Social Welfare  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

11 Current Position – Social Welfare  Projected life expectancy at Men Women

12 Options  Options to sustain Social Welfare pension module Increase retirement age PRSI / Taxation increases Increase payment to NPRF 12

13 Current Position – Supplementary Pensions  59% of over 30s in the workforce have supplementary pension coverage  52% of the total workforce have supplementary pension coverage  No progress towards adequacy target 13

14 Options  Enhancements to Voluntary System  Mandatory Pensions 14

15 Options 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 15

16 Recommendations  State incentive for personal contributions to PRSAs changed to matching contribution (SSIA style) Basis to be €1 state incentive for each €1 invested Limited access to fund before age 45 16

17Recommendations  Tax relief at higher rate for all personal contributions  Reduction of point of sale regulation for Standard PRSAs  Incentives to encourage SSIA proceeds to be saved for retirement targeted at those: Otherwise not qualifying for tax relief or Who have not recently fully availed of tax relief 17

18 Recommendations  Cap on incomes for contribution/benefit purposes supported provided derived savings used to improve incentives for lower-paid  Option of deferring drawing Social Welfare pension to be available 18

19 Mandatory Pension Provision  Considered issue in general rather than design a 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 19

20 Related Issues State Retirement Support  State-sponsored annuities for Defined Benefit / members / schemes  State-provided annuities for holders of small (PRSA/other) funds  State guarantee to holders of Standard PRSAs  Most Board members believe that State retirement support should be pursued vigorously 20

21 Related Issues  Funding Standard for DB schemes  Pension Protection Fund  Long-term care 21

22 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 22

23 Recommendations for Further Consideration  Others, including  Progress review in 2008  Research on women’s coverage  Regular projection of pension costs  Automatic enrolment  Pensions awareness campaigns 23

24 Conclusion  Board thanks Minister for opportunity  Believes Report will contribute to future decisions on pension policy 24