1. THE LABOUR COURT NATIONAL PENSIONS REVIEW AND PENSIONS UPDATE Brendan Kennedy Actuarial Adviser Mary Hutch Head of Information and Training27 March 2006

2. UPDATES ON: 1.Policy National Pensions Review EU Pensions Directive (IORPS) Funding Standard Projects 2006 2.Regulatory Occupational Pension Schemes PRSAs New Disclosure of Information Regulations Equal Pension Treatment 3.Pensions Information/Awareness National Pensions Awareness Campaign

3. POLICY – EU PENSIONS DIRECTIVE Directive 2003/41/EC came into force on 23 September 2003 “on the activities and supervision of Institutions for Occupational Retirement Provision” – “IORPS” EU Member States required to implement by 23 September 2005 Directive sets common minimum level of supervision across EU Member States Allows pension schemes to operate “Cross-Border” Protocol has been agreed between pension supervisors on “who does what and when” for cross- border supervision

4. POLICY – EU PENSIONS DIRECTIVE IRISH IMPLEMENTATION  Statutory  Requirements in Social Welfare and Pensions Act 2005  Underlying Regulations in place by 23 September  Associated tax changes introduced in Finance Act 2005  Approach  Implements essentials of Directive  No further new supervisory requirements added other than the essentials of the Directive  Areas Affected Scheme management  Investment  Funding  Cross-border

5. POLICY – EU PENSIONS DIRECTIVE Social Welfare & Pensions Act, 2005 Regulations  Trusteeship  Qualification and training requirements for trustees or their advisers.  Investment  Prudent investment, diversification of assets, regulated markets  Investment policy principles  Borrowing  Cross Border Schemes  Social and Labour Law issues  Authorisation All in place by 23 September 2005

6. POLICY – FUNDING STANDARD Social Welfare & Pensions Act, 2005  Small change to Standard resulting from 2004 Review  AFCs every three years (IORPS)  date of first AFC due after 23 September 2005 unchanged  new period applies to any subsequent AFCs  Wider grounds for extensions – Regulations  DC Schemes to value liabilities (IORPS) – Regulations  Early retirement subject to trustees consent if underfunded scheme  Frozen etc. schemes with over 100 active or deferred members  no longer exempt from Funding Standard and certain disclosure obligations (IORPS)  Schemes which fail Funding Standard  now disclose funding position to members

7. POLICY – PROJECTS 2006  Pension Supervisory Review  Funding Standard Review 2006  Trusteeship Review  National Pensions Awareness Campaign

8. Regulatory – Occupational Pension Schemes  Trustees of 6 schemes prosecuted in 2005 – 3 prosecutions pending in 2006 so far  377 schemes selected for compliance audits in 2005 – 341 audited – 110 initiated this far in 2006  Of 1,258 DB schemes – 68% satisfy Funding Standard – 212 applications for extension of funding period for over 3 ½ years.

9. Regulatory – PRSAs  10 PRSA Providers – 59 Products  Total no of products sold – 68,257 Standard– 53,001 Non-Standard– 15,256  No. of employers who designated PRSA Provider76,304  No. of employees who have taken out PRSAs through their employer 27,381  PRSA Compliance Strategy  Employer Audits  Prosecutions – 4 in 2005  Social Welfare Reports  Investigations

10. Regulatory – New Disclosure of Information Regulations  1998 Regulations revoked and replaced  Based on Pensions Board recommendations  IORPS disclosure requirements  New Guidance Notes and 2 Information Booklets pending

11. Regulatory – Equal Pension Treatment  Original Part VII of Pensions Act applied to equal treatment on gender grounds only  New Part VII introduced via Social Welfare Act 2004 – now 9 discriminatory grounds – Number of savers and exceptions  Fora for redress – The Equality Tribunal and Circuit Court  Pensions Board may refer certain matters to Equality Tribunal  Equality Tribunal may request Pensions Board to prepare report / answer questions in relation to schemes  New Guidance Notes and Information Booklet pending

12. National Pensions Awareness Campaigns (NPAC) 2003-2006

13. National Pensions Awareness Campaign 2003-2006 Campaign Overview Just over half (50.7%)* of the Irish workforce currently have supplementary cover, as identified in the CSO Quarterly National Household Survey, Pensions-2002. €500,000 was made available annually to carry out a National Pensions Awareness Campaign (NPAC), on behalf of Government in 2003, 2004, 2005 and this allocation was increased to one million Euro for 2006. The Board established an NPAC – Project Team to devise an awareness strategy and implementation plan for this important project. The primary objective of the campaign 2003 – 2006 is to heighten pensions awareness with the view to increasing pension coverage in Ireland. *Increased to 52.4% in 2004 survey

14. National Pensions Awareness Campaign (NPAC) Strategic Plan NPAC Objectives The primary objective of the campaign 2003 – 2006 is to heighten pension awareness with the view to increasing pension coverage in Ireland. The secondary objective is to ensure those with pension provision address the adequacy of that provision. Key Priorities for 2006 The Board will conduct a strategic pensions awareness campaign in 2006 with the aim of converting awareness into positive action; 1.in the form of increased pensions take up. 1.to build an educational foundation about retirement planning for the future

15. National Pensions Awareness Campaign Support Agencies promoting NPAC 2003 - 2006 Contact was made with the wide range of support Agencies who are assisting in delivering the NPAC message to their constituent clients and members. These include: Irish Congress of Trade Unions (ICTU) Irish Business and Employers Confederation (IBEC) Small Firms Association (SFA) Chambers of Commerce in Ireland (CCI) Irish Small and Medium Enterprises (ISME) Institute of Personnel and Development Other organisations and group involved in this process include: Citizen Information Centres Irish Farmers Association / Irish Country Womens Association National Library Network Rural Leader Groups Area Partnership Companies Irish Hotels Federation Licensed Vintners Association Restaurants Association of Ireland

16. Nikki Hayes 2FM DJ and Emma Caulfield AA Roadwatch deliver the ACTION PUNCH into National Pensions Action Week National Pensions Awareness Campaign 2005 - “Action & Responsibility”

17. On-line Communications With a drive towards more on line communication we promoted greater access to the Board’s website and have seen a 55% growth in visitor numbers in 2005 over 2004.

18. NPAC 2006 – the next frontier 2003/2004 – Awareness and Information 2005 – Action and Uptake 2006 – Action and Adequacy

19. We all have a responsible role to play in ….. ….actively promoting pensions take up !

20. National Pensions Review  Background/Overview  Targets / Current position  Options  Related Issues  Recommendations 2

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

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

23. 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

24. Current Position – Social Welfare  2005 Old Age (Contributory) Pension is €179.30 per week 32% of 2004 GAIE of €560.77 per week  2006 Old Age (Contributory) Pension is €193.30 per week 33% of estimated GAIE of €588 per week 8

25. Current Position – Social Welfare  Significant increase in Social Welfare cost  Projected cost of first pillar pensions as a % of GNP 200620162026203620462056 3.0%3.7%4.9%6.5%8.7%10.1% 9

26. Current Position – Social Welfare  Projected ratio of those at work to those aged over 65 200620162026203620462056 Nos. at work (000)2,0012,2132,268 2,1702,125 Aged over 65 (000)4646208441,1051,4031,532 No. at work per person aged over 654.33.62.72.11.51.4 10

27. Current Position – Social Welfare  Projected life expectancy at 65 200620162026203620462056 Men16.017.619.220.621.322.0 Women19.420.922.423.924.625.3 11

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

29. 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

30. Options  Enhancements to Voluntary System  Mandatory Pensions 14

31. 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

32. 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

33. 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

34. 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

35. 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

36. 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

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

38. 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

39. 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

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