The Irish Pensions Experience TEEU Seminar

1. The Irish Pensions Experience TEEU Seminar Wednesday 11 March 2009 Andrew Nugent Information Services The Pensions Board

2. The Pensions Board Established by the Pensions Act, 1990 • Main functions are set out in the Act and include • to monitor and supervise the operation of the Act and pension developments generally • Board has 2 statutory roles – regulatory and policy • Promoting pensions development, information and awareness is an associated support function. • Board conducts the National Pensions Awareness Campaign (NPAC) on behalf of Government as recommended in the “Securing Retirement Income” report of the National Pensions Policy Initiative published in 1998

3. The Pensions Board Focus Three key operational areas: • Supervision, regulation and enforcement • Policy, legal and actuarial • Information and awareness

5. Types of Irish Private Pensions • Company Pension Scheme (99,802 schemes with 800,398 members) (66% DB schemes and 34% DC schemes) • Personal Retirement Savings Accounts (PRSAs) (Over 140,000 PRSAs with asset value of €1.24 billion- June 2008) (86,613 employers had signed up with a PRSA provider ) • Personal Pension Plans and Retirement Annuity Contracts (RACs) (In excess of 200,000 contracts – Irish Insurance Federation) • Fund assets approximately €60 - €80 billion Voluntary regime for supplementary pension provision

6. Recent policy developments • National Pensions Policy Initiative 1998 • National Pensions Review 2006 • Special Savings for Retirement 2006

7. Current policy developments • Green Paper on Pensions published in October 2007, followed by consultation phase which is now completed • Commission on Taxation to consider how best the tax system can encourage long term savings to meet the needs of retirement • Pensions also a commitment in Programme for Government • Recent social partnership agreement which includes a commitment to produce legislation on the transfer of undertakings

8. Regulation, Supervision and Enforcement • Pensions Board taking tough approach for breaches of the Pensions Act • Board recently obtained a High Court judgement against an Irish company for €186,000 in pension arrears • On the spot fines regime in place since September 2007. Fine for each offence €2,000

9. Board’s Powers • Section 18 Authorisation – furnishing of information • Section 58 Prosecution for non-remittance of deductions within 21 days • Section 87 High Court order to have company pay ‘unpaid’ contributions to scheme

10. Policy developments in action • Review of Trusteeship (2006) • Report sent to Minister • Recommendation of E-learning for trustees • System being development

11. Trustees Responsibilty • In broad terms, trustees’ main duties under the Act are: • to ensure contributions are received • to ensure contributions are remitted • to invest the funds • to pay the benefits • to ensure that Funding Standard is met • to keep records and accounts • to preserve or transfer benefits • to disclose information • to ensure equal pensions treatment • to apply the resources of the scheme on wind up • to register the scheme with the Pensions Board

12. Key Recommendations – Trustee Ability To increase the standard of trustee ability, and therefore good governance! • Trustees Training • Potential new means of training (e.g. e-learning) should be explored • Pension scheme administrators should be registered and supervised

13. Registered Administrators • Implements the recommendations in the Board’s Report to the Minister on Trusteeship • Report noted that third party administrators were unregulated in terms of scheme administration work undertaken on behalf of trustees • Recommended that scheme administrators should register with Board who would then have responsibility to: • audit administration service provision, and • remove registration or apply sanctions if required standards are not met • Pensions Act amended to bring administrators within its remit in relation to certain core functions they perform

14. Social Welfare and Pensions Act, 2008Registered Administrators (RAs) What’s Required? • From 1 November 2008 trustees of every scheme (including large Trust RACs) must appoint an RA to provide “core administration functions” • Core administration functions are: • preparation of annual reports • preparation of benefit statements • maintenance of sufficient and accurate member records to discharge above • No RA qualification specified but RA must be satisfied they are competent and capable of: • providing core administration functions • have systems and procedures in place to deliver services

15. Social Welfare and Pensions Act, 2008Registered Administrators (RAs) What’s required • Trustee can appoint themselves as RAs if they can fulfill above requirements • 1 member schemes must appoint RA for benefit statement/ records/Eurostat information • RA can apply to be registered for either or both core administration functions and must maintain records for function for which appointed • RAs also required to provide statistical information for Eurostat • applies to RA responsible for preparation of annual report if more than 1 RA

16. Social Welfare and Pensions Act, 2008Registered Administrators (RAs) Registration Process • Existing RAs registered with Board prior to 1 November 08 • New RAs must register before commencing business - registration period lasts 12 months • RAs must complete form indicating: • schemes for which they are applying to be registered (including “frozen” schemes) • certify they are satisfied they are competent to provide core administration functions to these schemes • Overseas administrators must register as RA and provide address in the State for service of notices and proceedings

17. Social Welfare and Pensions Act, 2008Registered Administrators (RAs) Registration Process • RAs must renew their registration annually no later than 30 days before anniversary of initial registration or renewal • No fee payable on registration or renewal • Sample registration forms available on Board’s website together with a note of Eurostat requirements

18. Social Welfare and Pensions Act, 2008Registered Administrators (RAs) Non - Compliance and Sanctions • Offence for RAs to fail to carry out core functions within time limits specified - within 8 months of scheme year end for annual reports - within 1 month prior to date of issue for benefit statements • RAs who outsource still liable • Sanctions for failure to perform core functions may include: - prosecution (not on-the-spot-fines) - subjecting RA to conditions on renewal of its registration - refusal to renew the registration • RAs can rely on third party defence apart from outsource arrangement

19. Social Welfare and Pensions Act, 2008Registered Administrators (RAs) Non-Compliance and Sanctions (cont) • Sanction depends on degree of non-compliance and number of schemes in respect of which offence has been committed • RA can appeal Board’s decision to terminate or refuse to renew registration to High Court • Criminal offence to carry out core functions without registering with the Board • Trustees still retain current duties under Pensions Act to provide Annual Reports and Benefit Statements • where they fail to do so but can show they had taken reasonable steps to secure compliance by RA, Board will not pursue trustees

20. On-the-spot fines • Introduced in Social Welfare Law Reform and Pensions Act, 2007 • Came into force September 2007 • Alternative to going to court • More efficient way of addressing compliance issues • Board gives offender 21 days to remedy the offence and pay the appropriate fine (€2,000)

21. On-the-spot fines On-the-spot fines apply to a range of lesser offences under the Pensions Act, including: • Failure to register a scheme with the Board • Failure to provide scheme members with appropriate information • Failure to respond to requests for information from the Pensions Board • Employers not advising employees of pension or PRSA deductions

22. Why have a pension? • Provision of regular income to replace earnings in retirement, or early retirement due to ill-health • Provision of lump sum benefit income for surviving dependants • Tax Reliefs • Income Tax and PRSI relief on employee contributions • Employer contributions not taxed as BIK (unless paid to PRSA) • Pension schemes do not pay income or capital gains tax on investment returns. • Part of your retirement benefit may be paid as tax-free cash sum

23. Tax Relief on Personal Contributions The maximum contribution rate as a percentage of total pay/net relevant earnings on which you can receive tax relief is: Highest age at any time during the tax year Limit Under 30 15% 30-39 20% 40-49 25% 50-54 30% 55-59 35% 60 and over 40% Notes: Contributions will also be relieved from the PRSI and the Health Levy, if you pay these charges. For tax purposes these contributions are limited to earnings up to a maximum of €254,000 in any year.

24. We are Living Longer More Contract Work More mobility in careers Changing work patterns More Part Time Working Single Parent Households Smaller Families Separation/Divorce Changing world we live in

25. Changing demographics

26. Where will your income come from when you retire? The current state social welfare pension is €230.30 per week (or € 11,975.60 per year) …….will this be enough to meet all your needs in retirement? Almost 80% of the Pensions Board Consumer Researchsample said that the State old age pension would NOT meet their needs in retirement

27. National Pensions Action Campaign 2008

28. The Pensions message Simplify the message • Affordability • Portability • More straight forward than you think • Employers obligations

29. Pensions in the workplace • A good pension scheme has been long recognised as a very valuable asset for both the company and its employees. • There is a stronger commitment from employees to participate in pension schemes where the employer makes a contribution. • A company benefits from having: • a reputation and respect as a good employer. • a workforce that feels valued and important • increased loyalty and commitment from staff • an enhanced staff recruitment, reward and retention package

30. Employers’ Obligations/ Opportunity Access for all Employees • By law an employer must provide ALL employees with some form of access to a pension, whether they are in full-time, part-time, temporary, contract or casual employment. • All employers regardless of the size of their workforce areobliged to provide access to a Standard PRSA if those employees fall into the category of “excluded employees” (details available on the Board’s website). • Pensions Board encourages employers to regard pensions as part of the recruit, reward & retain approach to staff • Pensions Board also encourages all employees to ask the employer about their pension rights

31. Financial Planning Education Initiatives The Pensions Board is directly involved in the following educational related initiatives: • Joint ventures with FAS and Fáilte Ireland (National State Training Authorities) • National Recruitment Federation with over 100 private sector recruitment agency members • Information stands at education events

32. Challenges – Pensions aren’t exciting! • Key barriers to pension take-up included: • Heavy complicated pensions language • Absence of pensions from mainstream consumer media • Absence of pensions from general conversation

33. More information….. The Board’s website for Information – Checklists - Calculators Contact us by phone or e-mail on 01 - 613 1900 e-mail: info@pensionsboard.ie

34. We all have a responsible role to play in….. ….actively promoting pensions take up !