LOOKING AT PENSION SCENARIO INTO THE FUTURE ANNE MAHER Chief Executive The Pensions Board Dublin Ireland 8 October 2004 SIPTU Biennial Conference – Dublin Region

2 AGENDA Background Current Pensions Position Main Issues to be Addressed Next Steps

3 BACKGROUND Need for retirement provision is clear Ratio of economically active people v retired people set to rise Life expectancy increasing rapidly Ireland had national consultation process on pensions called National Pensions Policy Initiative 1996 – 1998 which led to agreed national pension policy Pension policy is a ‘partnership’ issue

4 CURRENT PENSIONS POSITON Social Welfare (First Pillar) pension providing either: Old age contributory pensions for those satisfying certain contribution conditions, or Old age non-contributory pension subject to a means test for those not qualifying for contributory pension Social Welfare pension arrangement funded on a pay- as-you-go basis supported by National Pensions Reserve Fund Public Service pension scheme which faces greatly increased costs (also supported by National Pensions Reserve Fund) Private pensions arising from funded occupational pension schemes and personal pensions which are tax encouraged

5 CURRENT PENSIONS POSITION Current Initiatives to Increase Private Pension Coverage Personal Retirement Savings Accounts (PRSAs) New type of personal pension Individual investment account – contract between individual and authorised PRSA provider PRSA provider is Investment firm Insurance Company Credit institution with approved PRSA product(s) 2 types Standard Non-standard Available to employed, self-employed, unemployed, etc. Mandatory Employer Access National Pensions Awareness Campaign

6 CURRENT PENSIONS POSITION Some Statistics Total private pension coverage 52.4% of those at work 59.1% of those over 30 at work 56.3% male/46.8% female 55.7% Dublin/44.7% Midlands Occupational pension schemes Number = 112,665 schemes/724,333 members Type = 66.7% Defined Benefit membership / 33.3% Defined Contribution membership Personal Pensions Number of holders = 200,000/250,000 approximately Type = money purchase with insurance companies

7 CURRENT PENSIONS POSITION Some Statistics PRSAs Number of providers = 10 Number of products = 56 Number of contracts sold = 32,920 Assets of contracts sold = € million National Pensions Reserve Fund Contributions = 1% GNP per annum Assets = €10.6 billion/9% GNP approximately Payouts = 2025 to 2055

8 MAIN ISSUES TO BE ADDRESSED Coverage needs to increase to approximately 70% of over 30s at work Adequacy of pension contributions – average contribution is 5% employer/5% employee which is usually not enough Funding of Defined Benefit schemes – 40% to 50% of DB schemes have deficiencies EU Directive(s) must be implemented – Pensions Directive, Equality Directives etc.

9 NEXT STEPS Increase pensions awareness National Pensions Awareness Campaign Ensure that current obligations are being complied with e.g. mandatory access to PRSAs Look at possible incentives to encourage pension contributions with focus on Lower-paid workers SSIA savers Regular monitoring of progress CSO surveys in 2005 and 2006 Major report to Oireachtas in 2006 reviewing progress on pension coverage/adequacy If there is not good progress by 2006 then various parties are recommending that mandatory private pensions be considered

10 IN CONCLUSION Retirement provision is essential We have an agreed national pensions policy and we should ALL do everything we can to make it work And if current policy does not work then we must look to other options to ensure retirement provision for all