1. NATIONAL PENSIONS REVIEW and SUBSEQUENT PROGRESS
SIPTU
National Executive Council
NATIONAL PENSIONS REVIEW
and
SUBSEQUENT PROGRESS
Brendan Kennedy – Actuarial Adviser
Anne Maher – Chief Executive
Jerry Moriarty – Head of Investigations & Compliance
The Pensions Board
24 February 2006

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

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

4. NATIONAL PENSIONS REVIEW
The Report 4

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 Targets broadly accepted
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 was
€ 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
2006
2016
2026
2036
2046
2056
3.0%
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 65
2006
2016
2026
2036
2046
2056
Nos. at work (000)
2,001
2,213
2,268
2,170
2,125
Aged over 65 (000)
464
620
844
1,105
1,403
1,532
No. at work per person aged over 65
4.3
3.6
2.7
2.1
1.5
1.4 10

11. Current Position – Social Welfare
Projected life expectancy at 65
2006
2016
2026
2036
2046
2056
Men
16.0
17.6
19.2
20.6
21.3
22.0
Women
19.4
20.9
22.4
23.9
24.6
25.3 11

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
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 13

14. Options
Enhancements to Voluntary System
Mandatory Pensions 14

15. Enhancements to Voluntary System
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

17. Recommendations
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. State Retirement Support
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. Issues Identified for Further Consideration
Others, including
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 23

24. Progress to Date Finance Bill 2006
Incentive for transfer of SSIA monies into RAC/ PRSAs/ AVCs by lower income holders
Increased tax limits for pension contributions for over 55s 24

25. What Happens Next?
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
Is holding a Pensions Forum to stimulate public debate and move issue forward 25

26. In Conclusion National Pensions Review is ‘work in progress’ and
Must lead to change 26