1. NATIONAL PENSIONS REVIEW Report of the Pensions Board Launch of Report by Minister Seamus Brennan TD on 17 January, 2006

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

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

4. 4

5. 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. 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. 7 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

8. 8 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

9. 9 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

10. 10 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

11. 11 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

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

13. 13 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

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

15. 15 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. 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. 17Recommendations  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. 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. 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. 20 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. 21 Related Issues  Funding Standard for DB schemes  Pension Protection Fund  Long-term care 21

22. 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. 23 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

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