CLOSING THE IRISH SAVINGS GAP ANNE MAHER Chief Executive29 April 2004 The Pensions Board IRISH INSURANCE FEDERATION HOW FAR WILL PRSAs TAKE US?

2. CONTENTS  Background  Progress  Future Direction

3. National Pensions Policy Initiative (NPPI)  Recognised need to increase private pension coverage  Recommended introduction of Personal Retirement Savings Account (PRSA)  PRSA to be new pensions vehicle which  suits flexible labour market  facilitates new providers  is simple  is cost effective  New pension structure to consist of  occupational pension schemes  PRSAs BACKGROUND

4. PRSA Framework  Extensive consultation process  Framework set out in Pensions (Amendment) Act 2002  PRSA key features  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 BACKGROUND

5.  Product approval jointly by Pensions Board and Revenue Commissioners  Regular information  Charges  not in cash terms  % of contributions and/or assets  Maximum charges for Standard PRSAs  No charge/penalty on transfers from another PRSA provider/pension arrangement  No charge on termination of contributions or suspension/recommencement of contributions  Tax Relief on member contributions and investment  Benefit is normally paid between age 60 and 75  Default Investment Strategy for each product Other PRSA Features BACKGROUND

6.  First PRSA products were approved on 24 February 2003  There are now  10 PRSA Providers  56 PRSA Products (23 Standard + 33 Non-Standard) PROGRESS

7. PRSA Figures up to 31 December 2003  Cumulative Value of Assets €41,006,  Total Number of PRSA Contracts Sold 19,022  standard14,686  non-standard 4,336  Total Number of Employers who have designated a PRSA Provider58, 770  number of these designations where contributions are being made 2,502  number of PRSA contracts under the 2,502 designations 7,499 PROGRESS

8. Good or Bad?  Good supply of Providers and Products  Slow start in difficult environment  Falling markets  Bad press  Post SSIA savings scheme  Increased pensions awareness  Reduction in all pension charges  Steady (if slow) progress now emerging PROGRESS

9. Issues Raised  Not as simple as planned  Mixed views over having Standard and Non-Standard  Limited Broker Support  Possible Over Regulation  Danger of ‘shell-PRSAs’ as with UK ‘shell- Stakeholders’ PROGRESS

10. Steps in Hand  Progress being monitored through Pensions Board Reports  Regular CSO surveys of overall pensions coverage (2004, 2005 and 2006)  National Pensions Awareness Campaign  PRSA Incentive Group identifying  obstacles to be removed  incentives to be considered  PRSI saving to employers under review  Statutory requirement to review coverage position in 2006  report to Oireachtas FUTURE DIRECTION

11.  PRSAs  will increase pension coverage directly and indirectly  but will increase be enough?  If they achieve coverage targets that is good  If they fail to achieve adequate coverage targets  Pensions Board recommendation in National Pensions Policy Initiative was to consider further mandatory options and  Government has indicated that it will ‘grasp the nettle’ if necessary. CONCLUSION