NATIONAL PENSIONS
REVIEW
Report of the Pensions Board
Launch of Report
by Minister Seamus Brennan TD
on 17 January, 2006
Agenda
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Background/Overview
Targets / Current position
Options
Related Issues
Recommendations
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2
Background
 Statutory Review not later than September
2006
 Minister’s request (February 2005)
 Final Report (October 2005)
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3
4
Overview
Report
 Reviews agreed pension targets
 Reviews current coverage and adequacy
 Considers how to sustain Social Welfare
pension
 Considers options to meet targets
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5
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
6
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
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7
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
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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%
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9
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 2,268 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
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10
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
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Options
 Options to sustain Social Welfare pension
module
• Increase retirement age
• PRSI / Taxation increases
• Increase payment to NPRF
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12
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
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13
Options
 Enhancements to Voluntary System
 Mandatory Pensions
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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
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15
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
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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
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17
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
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18
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
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19
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
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Related Issues
 Funding Standard for DB schemes
 Pension Protection Fund
 Long-term care
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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
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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
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Conclusion
 Board thanks Minister for opportunity
 Believes Report will contribute to future
decisions on pension policy
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