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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. Agenda. Background/Overview
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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
Agenda • Background/Overview • Targets / Current position • Options • Related Issues • Recommendations • Progress 2
Background • Statutory Review not later than September 2006 • Minister’s request (February 2005) • Final Report (October 2005) 3
NATIONAL PENSIONS REVIEW The Report 4
Overview Report • Reviews agreed pension targets • Reviews current coverage and adequacy • Considers how to sustain Social Welfare pension • Considers options to meet targets 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
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
Current Position – Social Welfare • 2005 Old Age (Contributory) Pension was • €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
Current Position – Social Welfare • Significant increase in Social Welfare cost • Projected cost of first pillar pensions as a % of GNP 9
Current Position – Social Welfare • Projected ratio of those at work to those aged over 65 10
Current Position – Social Welfare • Projected life expectancy at 65 11
Options • Options to sustain Social Welfare pension module • Increase retirement age • PRSI / Taxation increases • Increase payment to NPRF 12
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
Options • Enhancements to Voluntary System • Mandatory Pensions 14
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
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
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
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
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
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
Related Issues • Funding Standard for DB schemes • Pension Protection Fund • Long-term care 21
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
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
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
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
In Conclusion • National Pensions Review is ‘work in progress’ and • Must lead to change 26