OVERVIEW OF OCCUPATIONAL PENSIONS AND PRSAs

1. OVERVIEW OF OCCUPATIONAL PENSIONS AND PRSAs 12 November 2004 Aongus Horgan Assistant Head of Information & Training

2. OVERVIEW Pension Awareness Pension Arrangements in Ireland Role of Board Why a Pension Predictions Pensions Timebomb CSO Survey Start Early Occupational Pensions PRSAs Other Organisations Future Direction Next Steps

3. PENSION AWARENESS Awareness of Pensions Complexity Asking Questions

4. PENSION ARRANGEMENTS IN IRELAND Social Welfare Pension Contributory Pension Non-contributory Pension Regulated by Dept. Social & Family Affairs Retirement Annuity Contract/Personal Pension Individual Arrangements e.g. Self-Employed Irish Financial Services Regulatory Authority (IFSRA) Occupational Pension Public Sector/Private Sector Defined Benefit Can be Defined Benefit or Defined Contribution Regulated by the Pensions Board PRSA Individual Arrangements Everybody First time product Regulated and Approved by PB/Revenue See Pensions Board Booklet ‘What are my pension options’ (Appendix C) in relation to complaints and powers of the Pensions Ombudsman

5. ROLE OF THE PENSIONS BOARD Regulation/supervision of occupational pension schemes and Personal Retirement Savings Accounts (PRSAs) Advice to Minister for Social Affairs on pension matters generally Development of private pension provision through information and awareness Use enforcement powers to ensure compliance

6. PREDICTIONS The telephone has too many shortcomings … as a means of communication … the device is inherently of no value - Western Union Internal Memo 1876 Aeroplanes are interesting toys but of no military power - Field – Marshal Foch (date unknown) I think there is a world market for maybe 5 computers - T. Watson Chairman 1943

7. WHY A PENSION Holidays €167 Vs AIW Tax benefits Save €100 (higher tax payer) saving €48 Save €100 (lower tax payer) saving €26

8. A DEAD FISH………….

9. PENSIONS TIME BOMB • Ratio workers to pensioners • - 11% over age 65 • - 28% over age 65 • Longevity – USA – 1900 age 48 • Japan today age 90+ • Replacement Ration • Age of Retirement • - Greenspan – 73 • - Warner Buffet – 76

10. CSO QUARTERLY NATIONAL HOUSEHOLD SURVEY 7/9/2004 Private pension coverage 52.4% Men 56.3% Women 46.8% South West 50.4% Under 24 25.2% Catering 12.5% Agriculture 15.8%

11. START EARLY 21 year old woman on €21,000 save €35 per week to get 2/3 pension 42 year old €42,000 per week save €310 per week to set a 2/3 pension Women live longer Pensions Board calculator - www.pensionsboard.ie - 1890-65-65-65

12. OCCUPATIONAL PENSION SCHEMES IN IRELAND 112,685 occupational (i.e. employers) pension schemes 724,333 members in occupational pension schemes Overall membership is increasing

13. OCCUPATIONAL PENSION SCHEMES Employees in Private/Commercial Public Sector • Employer(s) establish schemes on voluntary basis • Scheme must be set up as a trust • Separate from employer’s business • Trustees responsible for administration • Schemes financed on a pre-funded basis – resources set aside in a trust fund for payment of penisons, when due

14. PRSA STATISTICS AT 30 SEPTEMBER 2004 • Total value of assets €106 million approximately • Total number of Contracts sold 37,086 • Standard 29,373 • Non-standard 7,713 • Total number of employers who have designated a PRSA provider 66,486

15. WHAT IS A PRSA? • Simple contract between a PERSON and a PRSA PROVIDER • PERSON: employees, self-employed, homemakers, carers, unemployed or any other category of person • PRSA PROVIDER: an investment firm, a life office or a credit institution whichproduces , markets or sells PRSA products

16. WHAT IS A PRSA? • Investment account to save for retirement • 2 types of PRSAs • Standard PRSA - 5% of contributions paid 1% per annum of fund • Non-Standard PRSA - no maximum limits on charges

17. PRSA PROVIDERS WITH APPROVED PRODUCTS • Ark Life Assurance Company Limited, • Canada Life Assurance (Ireland) Ltd, • Custom House Capital Limited, • Eagle Star Life Assurance Company of IRL Ltd, • EBS Building Society, • Friends First Life Assurance Company Ltd. • Hibernian Life & Pensions Ltd, • Irish Life Assurance plc, • New Ireland Assurance Company plc, • The Standard Life Assurance Co. • 56 products – 23 Standard and 33 Non – Standard • See Pensions Board website www.pensionsboard.ie

18. KEY FEATURES of a PRSA • All PRSA products approved by Pensions Board and Revenue Commissioners • All offer a Default Investment Strategy (DIS) • Tax relief on Contributions • Portable • Transferable • Flexible • Benefits determined by amount of contributions put in and how investments perform • Benefits at retirement

19. EMPLOYERS – WHAT THEY MUST DO MUST have provided access by 15 September 2003 IF • You have NO PENSION SCHEME OR • Your PENSION SCHEME does not cover ALL EMPLOYEES for pension benefits (“excluded employees”) OR • You do not have an AVC arrangement

20. OTHER ORGANISATIONS Ombudsman - financial redress to individuals - where they have lost through maladministration - to decide on questions of fact or law Department of Social & Family Affairs - OACP - RP - OANCP

21. FUTURE DIRECTION Review of Funding Standard Ireland has an agreed national pensions strategy Strategy is supported by Government, employers, trade unions and pensions industry Steady PRSA progress Progress report to Oireachtas (Irish Parliament) in Autumn 2006 2006 progress report likely to trigger debate on strategy.

22. NEXT STEPS Review your pension arrangement/requirements You can’t hide from your financial future Booklets Pensions Board website www.pensionsboard.ie LoCall 1890 65 65 65