1. The Pension System in Ireland
Paul Kenny
Retirement Course Leader
Retirement Planning Council of Ireland

2. Who we are 40 years providing impartial advice.
Lifestyle & financial focus.
Weekly Dublin courses.
Monthly regional courses.
In-house & Executive Courses.
Not-for-profit organisation.
Voluntary board of Directors.
About me.
Use this opportunity to discuss the strength of the programme and to introduce yourself.

3. Pension Access in Ireland
Pension provision by private sector employers is mostly voluntary, or negotiated by Trades Unions
Only about 50% of the working population in Ireland has access to occupational pensions
Disadvantaged groups include workers in agriculture, hospitality, the self-employed and “atypical” workers – part-time, fixed term, temporary
So, many people have to rely on the two elements of the State pension

4. 1. State Pension (Contributory)
Based on contributions of employers, employees and self-employed
Qualification conditions complicated
Present system produces anomalies, often affecting women adversely
Review and new system promised for 2020
Recent developments include raising age of payment: 65 to 2014, 66 to 2020, 67 to 2028, then 68

5. 2. State Pension (non-Contributory)
Means tested
Intended for those who do not qualify for State Pensions (Contributory) or for reduced rate of pension
Must be habitually resident in Ireland at time of application and thereafter

6. 3. Public Service Pensions
Defined Benefit pension schemes
Originally based on United Kingdom legislation (1834)
May be contributory or non-contributory Pension age generally 60-70, mainly 65
Benefits based on pay and service
Maximum pension 50% of pay plus lump sum 150% of pay
Membership of separate spouses’ and children’s scheme mandatory
360,000 active members in 2016 (Numbers given exclude police and Defence Forces)

7. 4. Other Workplace Pensions
Pension provision by employers is not compulsory
Defined benefit provision mostly by larger employers – number of schemes decreasing
schemes account for 104,000 active members out of a total of 111,500
Most employer-provided schemes are Defined Contribution – 300,000 active members in 2016
76 schemes for employers with >500 workers
57,666 one-member schemes of employers

8. Other Features
Minimum age for early retirement is 50, except in ill health
Minimum Normal Retirement Age is 60*
Most common Normal Retirement Age is 65
Maximum retirement age is 70
* Exceptions for military, sportspersons, firefighters, etc

9. Tax Treatment
Subject to certain limits, employer and employee contributions are allowed against tax liability
Pension funds are not taxable on investment gains, whether income or capital
With the exception of certain restricted lump sums, retirement benefits are subject to income tax on payment
Generous limits on tax-free payment to survivors on death of a scheme member

10. Fiscal Regulation
All schemes governed by the Taxes Acts and subject to approval of the Revenue Commissioners
Except Statutory schemes in the public service
Legislation limits maximum benefits and contributions
Employers and employees may contribute to workplace pension schemes
Maximum employee contributions are age-related

11. Employee Contributions
These limits apply to employee contributions to workplace pension schemes and to contributions to individual private arrangements
Tax-relieved, deducted from pay at source
Maximum annual pay for tax relief is €115,000
Maximum contribution allowed:
Under age 30, 15%
Age 30-39, 20%
Age 40-49, 25%
Age , 30% ( and professional sportspersons of lower ages)
Age 55-60, 35%
Over age 60, 40%

12. Individual Private Pension Provision
Personal Pensions, formally called Retirement Annuity Contracts (RACs)
Individual contracts with life assurance companies
Intended for the self-employed and those in non-pensionable employment
Always defined contribution in structure
No standard terms or charges for these contracts
Contribution limits same as for occupational pension schemes
Numbers for these not available

13. Personal Retirement Savings Accounts
PRSAs introduced in 2003
Originally intended to replace RACs
Now the most common individual product
Providers and contracts must be approved by the Revenue Commissioners and the Regulator (the Pensions Authority): Provider must be either an investment firm authorised under Directive 93/22EC, or an authorised insurance undertaking or a credit institution
Two types of PRSA: Standard and Non-Standard

14. PRSAs (continued)
All PRSAs must have a default investment strategy, regulated by the Pensions Act – pooled funds only
All assets must be held by a custodian
Provider may not require minimum contribution of more than €300 per year (other restrictions apply)
No charge permitted for transfers between PRSAs
Initial charges, charges on suspension or termination of contract forbidden
PRSA may not be sold on condition that another product (e.g., risk benefit) must be purchased

15. PRSAs- 3
Any person may invest in a PRSA – employed, unemployed or self-employed
For his/her own benefit only – not for a third party
PRSAs are used extensively for Additional Voluntary Contributions (AVCs) by members of pension schemes – no specific link to scheme required
Even if benefits being paid from a PRSA, owner may still make contributions
Act provides for detailed reporting and disclosure requirements

16. PRSAs -4
Minimum age for payment of benefits: 60; Maximum, 75; - any age on permanent incapacity
Standard PRSAs:
Restriction on investment
Caps on charges
5% of any contribution or
1% of the assets or
Any combination of these, provided that 1% of assets not exceeded
Higher charges and no investment restrictions in Non-standard PRSAs – may invest directly in assets

17. PRSAs -5
At end of 2016, there were 185,707 Standard PRSAs and 65,012 non-standard PRSAs
Total Assets under management: €5,600,000,000
Employers who do not provide access to an occupational pension scheme within six months of an employee joining service must, by law, provide access to a standard PRSA and deduction facilities for employee contributions
But employer not compelled to contribute

18. Taking the Benefits
In Defined Benefit Occupational schemes, maximum tax free lump sum of 1½ times salary (depends on service completed)
In defined contribution schemes, including RACs and PRSAs, maximum lump sum is ¼ of the fund
Any lump sum over €200,000 is taxable
In all DC arrangements, the balance is used either to purchase an annuity or invested in an Approved Retirement Fund (ARF)

19. Approved Retirement Funds
An investment contract – alternative to buying an annuity – annuities expensive , low interest rates
ARF Accessed with funds from: DC pension schemes; Retirement Annuity Contracts; PRSAs and AVCs
Assets not taxed while invested
Withdrawals subject to tax
“Imputed withdrawals” – 4% per year to age 70, 5% after that age
Minimum pension income required to access ARF

20. Advantages and Disadvantages
ARF removes need to change investment options as retirement approaches
Low interest rates make annuity unattractive
Asset may be left to dependants on death
Owner discretion on amount of withdrawal
BUT
Unlike an annuity, not guaranteed for life
No “joint life” option, so no automatic reversion to dependants – must be dealt with in a will

21. Approved PRSA Providers
Ark Life Assurance Ireland Ltd.
Aviva Life & Pensions Ireland Limited.
BCWM plc
Davy Stockbrokers
Friends First Life Assurance Co. Ltd.
Goodbody Stockbrokers
Independent Trustee Company Limited
Irish Life Assurance plc
Merrion Stockbrokers Ltd
Newcourt Retirement Fund Managers Limited
New Ireland Assurance Co. plc/Bank of Ireland Life
Standard Life Assurance Limited
Zurich Life Assurance plc.

22. Pension Providers - Insured
New Ireland Assurance/Bank of Ireland Life
Aviva
Friends First
Standard Life Assurance
Irish Life Assurance /Canada Life
Zurich Life
Acorn Life
Phoenix Ireland

23. Many fund choices For example: Zurich Life: 53 funds Aviva : 16
Standard life : 36
New Ireland/Bank of Ireland : 50
Acorn Life : 4
Irish Life: <70
Friends First : 46

24. Investment of pension funds
Very large schemes directly invested in assets
Most schemes using pooled funds
Member investment choice, switching funds
Traditional insurance contracts no longer available
“Small Self-Administered Schemes” and “Self-directed” plans – Revenue oversight

25. The Future
Government to review State Pension system by 2020 – proposed changes to eligibility conditions to make system more equitable
Possibility of additional second-tier pension arrangement – “Auto Enrolment” proposed , to get more people into pension provision
Pensions Authority trying to reduce the total number of separate schemes through use of “master trusts”

26. Thank You Any Questions?
Please complete reflections from day 1 on page 9
Encouraging reflection is very positive for improving self esteem and realising the learning experience