1. Hybrid Pensions Annuities Report Brendan Kennedy The Pensions Board Friday 2 nd May 2008

2. Pensions Board & Towards 2016  Hybrid Schemes  Green Paper  Transfer of undertakings  Annuity Report

3. Hybrid Schemes - Background  Closure of DB schemes to new members  Increase in DC membership  Hybrid schemes

5. Hybrid Booklet  Explain concepts  Empower participants  No recommendations

6. EmployerEmployee X X X Risk - DB Investment Salary Life Expectancy

7. EmployerEmployee X X X Risk - DC Investment Salary Life Expectancy

8. EmployerEmployee X X X Risk – Hybrid Example Investment Salary Life Expectancy

9. Risk Sharing  Different employees  Different income  Different design

10. Contribution rate more important than design

11. Review of the Irish Annuities Market Life Strategies / Indecon

12. Background  Obligation on some to buy annuities  Increase in cost of annuities  Perception of overcharging

13. Issues examined  Demand – grow in real terms  Supply – no real barriers  Pricing compared to models

14. Conclusions and Findings  Small annuities market in Ireland  Most demand is due to those with no option but to buy an annuity  ARFs are becoming more attractive and reducing annuity demand  Basic annuity products account for most of sales

15. Conclusions and Findings  Little product innovation  Market concentrated – dominated by small number of players  Demand likely to increase significantly – depends on policy developments  Pricing is determined by long term bond yields and mortality assumptions

16. Conclusions and Findings  Evidence of price compression in market  Our model based on reasonable assumptions predicts prices broadly in line with market prices  Money’s Worth Analysis suggests returns not excessive

17. ARFs / Annuities  Green Paper  Commission on Taxation