Pensions Regulation in Ireland

1. Pensions Regulation in Ireland presentation to The Bulgarian Association of Supplementary Pension Security Companies 14 June 2012

2. The Pensions BoardEstablished by the Pensions Act, 1990

3. Pensions system in Ireland • Pillar 1: State pension • Contributory pension of maximum of €230.30 per week = 35% of average earnings (Non-statutory political commitment to maintain at this level) • Means-tested non-contributory pension of €219 per week • Aim is essentially one of poverty prevention • Pillar 2: Occupational pension schemes • Employer sponsored DB and DC schemes • Operate on a funded basis (private sector) and pay-as you go basis (public service) • Pillar 3: Personal pensions • Personal pension vehicles • Includes Personal Retirement Savings Accounts (PRSAs) regulated by Board and Retirement Annuity Contracts (RACs) • Total of pillars 2 and 3 pension fund assets = 45% of GDP - but account for just 25% of retirement income • 75% rely on the State pension

4. Types of private pensions

5. Numbers in Irish private pensions (at 31 December 2011) • Company Pension Schemes • 534,921members in 1,061 DB schemes • 956 schemes with 196,628 members are subject to the Funding Standard • 330,000 approx are Public Service employees • 239,551members in over 100,000 DC schemes (includes frozen and AVC schemes) • 50,000 approx are single member schemes • Personal Retirement Savings Accounts (PRSAs) 197,996 PRSAs with asset value of €3.01 billion • Personal Pension Plans/Retirement Annuity Contracts (RACs) (200,000 + contracts – Irish Insurance Federation)

6. Pensions Coverage in the Irish Workforce

7. Why have a Pension? Life expectancy increasing – 20 plus years in retirement What kind of lifestyle do you want and how will you fund it? Current State pension = €230.30 per week 8 out of 10 people say - the State pension will not meet all their needs in retirement Pension = Income in Retirement

8. Tax relief on personal contributions 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% For tax purposes limited to earnings up to a maximum of €115,000 in any year. Maximum pension fund of €2.3 million.

9. Changing world we live in

10. Changing Demographics

11. Pensions in the workplace “A good pension is a valuable asset, don’t leave work without it” • The workplace is the optimum location for pension provision, information and education • 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

12. Employers’ Pension Obligations • 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 their size areobliged to provide access to a Standard PRSA for “excluded employees” • The Board encourages employers to regard pensions as part of the recruit, reward & retain approach to staff • The Board also encourages all employees to ask their employer about their pension rights

13. The National Pensions Framework The recommendations in the Framework include : • increasing the State pension age to 66 in 2014, 67 in 2021, 68 in 2028 • introducing auto-enrolment into a pension for those aged 22 years or over and in employment from 2014 • new model defined benefit pension scheme • new model scheme for public servants An Implementation Group has been established to progress the National Pensions Framework

14. Trustee Challenges

15. Trusteeship Numbers • Number of schemes and trustees The Board estimates that at any one time there are some 130,000 pension scheme trustees connected with the 100,000 plus pension schemes in Ireland with some €70 billion in assets under management.  • Trustee E-learning Over 2,000 people have subscribed to the Board’sTrustee E-learning facility. • Trustee Trainers registered with the Board 42 trustee trainers are registered on the Board’s website.

16. Main duties of Trustees under the Act

17. What the Board expects of trustees • Before describing, it may be useful to set out what we do not expect: • Trustees are not expected to be full-time • Trustees are not expected to be pension professionals • Trustees are not expected to be infallible. • Nonetheless, trustees are looking after money on behalf of other people. Therefore there are minimum standards they must satisfy: • They must have certain basic knowledge • They must engage • They must act reasonably • They must have process

18. Risk Management for Trustees • Where trustees do not have the knowledge themselves, they engage professionals – most often covering administration, investment and communications. • It is the trustees’ job to: • question the professionals • to push back, and not to accept answers that they don’t understand or do not feel to be right. • The trustees must recognise that it is their responsibility to make decisions, and their options should be set out for them clearly by the professional advisers. • This is probably the most challenging aspect of being a trustee. • It is important that trustees identify the decisions that they are making, and that they have set out the alternatives among which they are deciding.

19. Risk Management Strategy • Unless trustees have a strategy for dealing with risks, they are not managing their scheme properly. • There is no single or simple answer - trustees must identify the best answers for their own scheme. • Hoping it won’t happen or hoping that something will turn up is not a risk management strategy. • As a trustee do you know the costs? • How optimistic are the calculations? • How much might they vary? • Are you depending on high equity returns? • What happens if you don’t get them? • In the long run, trustees will do themselves and all others concerned with the scheme most good if they look at scheme funding from all angles.

20. Supporting Trustees • The Board supports trustees in the following ways: • the Trustee Handbook • an extensive range of guidance and FAQs on pension matters generally • booklets and checklists for trustees • the Board provides an information and enquiry service • a register of trustee training providers is available on the Board’s website • the Board has developed an e-learning facility for trustees which is free of charge and can be accessed on the Board’s website

21. The Board’s approach to Regulation Presented by Catherine Goulding

22. The Board’s approach to Regulation The Board’s regulatory objectives are based on a hierarchy of risk priorities as follows: 1st priority scheme or PRSA assets or contributions being misappropriated 2nd priority benefit entitlements being calculated incorrectly 3rd priority defined benefit schemes being funded inadequately 4th priority inappropriate investment of pension scheme assets 5th priority insufficient information provided to members This order represents the seriousness of the risks, not the likelihood of their occurrence.

23. Regulation, Supervision & Enforcement Pro-active approach • Registered Administrators introduced in November 2008 • Compulsory trustees training introduced in February 2010 On the spot fines regime introduced in September 2007 - fine for each offence = €2,000

24. Engagement and Enforcement Activity On-the-spot fines The Board has power to issue fines notices to trustees for certain breaches of the Pensions Act. 2010 OTSFs notices issued to 76 trustees of 37 schemes relating to: • failure to submit or late submission of actuarial funding certificates – 20 schemes • non-payment of Pension Board fees - 10 schemes • late preparation of trustee annual reports - 6 schemes • failure to furnish options on leaving service - 1 scheme €88,000 was paid by trustees in fines to the Board and subsequently passed on to the Exchequer during 2010. 2011 OTSFs totalling €14,000 were paid by 7 trustees of 3 schemes

25. Engagement and Enforcement Activity Meetings with Scheme Trustees and Pension Providers Purpose: To discuss their schemes compliance with the Pensions Act Scheme Documentation ‘audited’ in advance Findings discussed Follow-up action Scheme specific issues i.e. funding of DB schemes 2011: 26 meetings held

26. Registered Administrators (RAs) • From 1 November 2008 trustees of every scheme 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

27. Engagement and Enforcement Activity RA on-site Inspections • On-site inspections of RAs commenced in 2010 • 12 on-site inspections carried out in 2011 • 40 inspections scheduled for 2012 • Selection done both on a risk–based and random selection basis - covers the broad spectrum of RAs based on their type and size of business • Reports on Finding’s published on Board’s website

28. Investigations Whistle blow reports – from scheme members, pension administrators, through Board’s proactive supervisory activity Deduction and non-remittance of pension contributions Mainly in the Construction Industry Full investigation carried out by the Board Board successfully prosecuted 26 cases in 2011

29. Sanctions for non-compliance Board prosecutions: • The Pensions Board may take prosecutions against persons who breach provisions of the Act or Regulations made there-under • Offences can be prosecuted by the Board on summary basis (District Court) or by DPP on indictment (Circuit Court) • On summary conviction - a fine not exceeding €5,000 or imprisonment for term not exceeding 1 year or both • On conviction or indictment by DPP- a fine not exceeding €25,000 or imprisonment for term not exceeding 2 years or both (or in the case of a prosecution under Section 58(A) a fine not exceeding €25,000 or imprisonment for term not exceeding 5 years or both)

30. National Pensions Awareness Campaign (NPAC) Presented by Deirdre Kelly

31. NPAC - introduction NPAC was established in 2003, by the Department of Social Protection following a recommendation in NPPI (National Pensions Policy Initiative 1998). The campaign is funded by Government on an annual basis through the Department of Social Protection and is managed by the Board. Each year a working group plan and review the strategy and the implementation of the campaign.

32. NPAC objectives NPAC objectives are to: • increase pensions awareness including better understanding of pensions and tax relief support, particularly among the target audiences where pension activity is low • prompt action among those with no pension provision • encourage those with pensions to address the adequacy of their pension provision and to better “engage” with the pension process with their own plans. • progress development of financial education planning and programmes.

33. NPAC programme 2012 Women • Young People Target Groups • Agriculture • Hospitality • Retail

34. Pensions information Pension calculators Free Online Trustee Training, Guidance & FAQs, E-mail alerts & Trustee supports Information booklets Pension checklists Enquiry service info@pensionsboard.ie/ 01-6131900

35. and to finish….. Thank you for your time and attention. I hope you found the presentation interesting and of some benefit.

36. Questions & Answers