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Pensions for the Future

Learn about the importance of pensions and how they can provide a regular income for retirement. Discover different types of pensions and the tax benefits associated with them.

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Pensions for the Future

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  1. Pensions for the Future David Malone Project Manager National Pensions Awareness Campaign The Pensions Board presentation to the Amalgamated Transport & General Workers Union Training Course Wednesday 25th April 2007 Park Hotel, Dungarvan Co. Waterford.

  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. National Pensions Action Campaign 2007

  4. Where will your income come from when you retire? The current state social welfare pension is €209.30 per week (or € 10,883 per year) …….will this be enough for you to live on ? 87% of the Pensions Board Consumer Researchsample said that the State old age pension would NOT meet their needs in retirement

  5. 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

  6. 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.

  7. Types of Irish Private Pensions • Company Pension Scheme (88,069 schemes with 726,405 members) (68.9% DB schemes and 31.1% DC schemes) (Fund assets in excess of €70 billion (estimate)) • Personal Retirement Savings Accounts (PRSAs) (95,000 PRSAs with asset value of €835m - end Dec 2006) (80,463 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) Voluntary regime for supplementary pension provision

  8. Company Pension Schemes • Also known as Occupational Pension Schemes, sponsored by employers on behalf of employees • In private sector, funded arrangement set up under trust so funds held separately from company assets • In public sector usually ‘pay as you go’ unless commercial public sector • Occupational Pension Schemes fall into 2 categories: 1. Defined Benefit 2. Defined Contribution • Operation of schemes is regulated by Pensions Act and monitored by the Pensions Board

  9. Occupational Pension Scheme Benefits • Pension payable on retirement, usually 65, for your lifetime and taxed under PAYE • Once-off tax free cash sum on retirement of up to 1½ final salary • A pension may be payable to your spouse/dependants/children on your death, either before of after pension commences. • A lump sum may be payable on your death either before or after your retirement • A pension and/or lump sum may be payable if you retire in ill-health See PB Information Booklets ‘What are my Pension Options?’ and ‘Women and Pensions’

  10. Personal Retirement Savings Accounts (PRSAs) • For employees, self-employed, homemakers, carers, unemployed or any other category • Contract between individual and PRSA provider – Investment account holding units in investments managed by approved PRSA provider • Two types –Standard PRSA and Non-Standard PRSA • Mandatory employer access • Usual tax reliefs applicable • Transfers to and from other pension arrangements are facilitated as far as possible • Pension Board approves PRSA products and monitors activities of PRSA providers

  11. PRSA Benefits • In general can take retirement benefit anytime from 60-75 • 25% of fund as tax-free lump sum at retirement • Number of options on how to use balance 1. Purchase annuity with life assurance company, or 2. Transfer value of assets to an Approved Retirement Fund (ARF) subject to meeting the qualifying conditions. Withdraw funds as required (taxed as PAYE) , or

  12. PRSA Benefits 3. Retain funds in PRSA and opt to draw income as required (taxed as PAYE). To avail of this option, a minimum of €63,500 must be used to purchase annuity or kept in PRSA until age 75 unless minimum income of €12,700 pa 4. On death before retirement – value of fund available as death benefit payable as lump sum or pension or combination of both 5. On death after retirement benefits payable depend on options chosen at time annuity purchased and if ARF in place.

  13. Personal Pensions and Retirement Annuity Contracts (RACS) • Self-employed or those in non-pensionable employment can take out a Personal Pension Plan aka Retirement Annuity Contract (RAC) • Individual contract between individual and insurance company • Can also effect a life assurance policy at some time to protect dependants • These plans are not covered by Pensions Act but are regulated by Insurance Acts

  14. Personal Pensions/RACs Benefits • Options and benefits on death and on retirement much the same as PRSAs • May not normally retire ‘till age 60 • May retire at any stage in permanent ill-health • See PB Information Booklets ‘What are my pensions options?’ , ‘Women and Pensions’ and ‘PRSAs – a Consumer’s Guide’

  15. SSIAs and Pensions • New SSIA Related Pension Incentive – Finance Act 2006 • Applies to incomes < €50,000 • Tax Credit of €1 for every €3 invested up to a max €2,500 – Invest €7,500 and get €2,500 from State. • Amount transferred from SSIA not subject to 23% exit tax. • Scheme operates from 1 June 2006 • See – SSIA Pension Incentive on revenue.ie

  16. The Facts • Only 61.8 % of the adult Irish workforce over 30 years of age • Only 58.3% of men in the Irish workforce • Only 50.6% of women in the Irish workforce Less than 25% of those working in • the agricultural industries including farming • working seasonal & part-time  • working in the catering & tourism industries   ….…have  private pensions (Source: CSO Survey Dec 2006)

  17. Consumer Research and Awareness Audits The key barriers to starting a pension for most people are: • Can’t afford one • house/holiday/car etc are the immediate priority • Too young to start a pension • Too complicated don’t understand pensions

  18. We are Living Longer More Contract Work More Part Time Working Single Parent Households Smaller Families Separation Divorce Changing World We Live In

  19. Changing Demographics

  20. Start your pension early • a man retiring at 65 now can expect to live to 85 • a woman retiring at 65 can expect to live to 88 ….that’s over 20 years in retirement !

  21. Employers Play your Part 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).

  22. National Pensions Action Campaign 2007 “Time for Action”

  23. National Pensions Action Campaign 2007Background and Objectives Background to 2007 Campaign • The 2007 National Pensions Action Campaign message will be “Now is the time to take Pensions Action” • CSO figures identify specific sectors with low levels of pension penetration - PR Strategy will focus on driving action in these specific sectors, particularly 25 – 35 year olds. • Budget of € 1,000,000 is available for NPAC activity in 2007. • The maturing of the majority of SSIAs during 2007 is a major opportunity to encourage greater take-up of pensions and to address pensions adequacy. NPAC Objectives 2007 • The primary objective of the campaign in 2007 is to drive action by those with no pension and to ensure those with pension provision address the adequacy of that provision. • A related objective is to encourage SSIA holders to make pension provision a priority this year.

  24. National Pensions Action Campaign 2007 Key Target Sectors Population aged 25 – 35 years old– a key target for the Pensions Board, as it is critical that workers start their pension early in their working life in order to ensure they have adequate provision for their retirement Women– the female population has traditionally lower pension coverage than the male population and so is a key target sector for the Pensions Board Young People / Graduates– it is important that the pension’s message reaches people before they start their first job. Hospitality/Farming / Rural Community - The lowest levels of pensions coverage are in the Hospitality and Agri-sectors, which makes building positive pensions awareness within these communities a key target of NPAC 2007. International Workers– As more and more inward migration takes place in Ireland, a high percentage of the migrant workers do not have a pension.

  25. National Pensions Awareness Campaign 2007Intensified focus on the key targets (25 – 35 year olds) Key targets (25 – 35 year olds) Approx 800,000 people in this age group 47% - do NOT have private pension coverage 40% - say they never got around to organising a pension 23% - say they can’t afford one 21% - DO have an SSIA (CSO QNHS – 2005) (Pop stats – CSO 2006 estimate)

  26. National Pensions Action Campaign 2007PR and Advertising Strategy NPAC 2007 proposes to engage in an intensive multi tiered messaging and media approach designed to drive action amongst the general public and the hard to reach sub-groups. This will involve a large advertising media spend over a short period to drive impact. Television is the strongest medium to communicate the message as it delivers high levels of coverage and ensures all age groups and social demographics are reached. Radio is the cost effective way of increasing the frequency of message and ensuring coverage of occasional television viewers. Ireland has the highest level of listenership to radio in Europe. Cinema will be used to ensure coverage of younger adults who tend to be “light" TV viewers. Press will be used as an informational medium in increasing the awareness of the importance for starting a pension. Ambient Posters on buses and in washrooms will be used in tandem with Internet banner advertising to target young consumers in the course of their daily routines.

  27. NPAC 2007“Now is the time to take Pensions Action”

  28. National Pensions Awareness Campaign Support Agencies promoting NPAC 2006 Contact is maintained with the wide range of support Agencies who are assisting in delivering the NPAC message to their constituent clients and members. These include: Pensions Industry Sector Irish Congress of Trade Unions (ICTU) Irish Business and Employers Confederation (IBEC) Small Firms Association (SFA) Chambers of Commerce in Ireland (CCI) Irish Small and Medium Enterprises (ISME) Institute of Personnel and Development Other organisations and group involved in this process include: Citizen Information Centres National Women’s Council of Ireland Irish Farmers Association / Irish Country Women’s Association National Library Network Rural Leader Groups Area Partnership Companies Irish Hotels Federation Licensed Vintners Association Restaurants Association of Ireland

  29. National Pensions Action Campaign 2007 National Pensions Action Week12th – 18th March 2007 “Time for Action on Pensions”

  30. NPAW 2007 Actions & Results Summary • Television Advertising 30/20/10 second ads on RTE 1&2, TV3, SKY, E4, Paramount, MTV, Ch 6, Living, Setanta • Radio Advertising 30 second ads on National Stations plus local regional stations • Press Editorial supplements in the Irish Times and the Star. Press ads in all National titles for SSIA Day • Online entertainment.ie, ticketmaster.ie, yahoo.ie, daft.ie, iol,ie, hotpress.ie • Ambient/Outdoor Luas, Dart and Bus Posters. Admobiles. Posters in Washrooms and all Third Level Colleges. • Media Interviews The Pensions Board team carried out over 40 media interviews for local and national radio and press leading up to, during and following NPAW. • Website Visits Estimate of 50,000 visitors for March is 100% increase on 2006 NPAW month • Public Enquiries Overall NPAW enquiries at 352 were up by 35% on 2006 and particularly written enquiries at 157 saw an increase of 200% over a normal week.

  31. NPAW 2007 Press Conference and Photocall Launch Minister for Social Affairs, Seamus Brennan TD launched National Pensions Action Week 2007 on Monday 5th March 2007 with a Press Conference and Photocall in Government Press Centre. Claire Byrne – Newstalk 106 - Breakfast Show Presenter was on hand for photocall opportunities.

  32. NPAW 2007 Monday 12th March Pensions in the Workplace Day Tesco hosted over 100 seminars for their 12,500 staff in over 94 locations throughout the country to mark “Pensions in the Workplace”. The Minister Seamus Brennan, Senior Tesco Management, Brendan Kennedy and Mary Hutch from the Board were in Tesco, Dundrum to launch this initiative.

  33. NPAW 2007 Tuesday 13th March SSIA Day One off print advertising run in all the National Daily newspapers.

  34. NPAW 2007 Wednesday 14th March National Pensions Sign Up Day The Pensions Board handed out 30,000 pension flyers in key locations in all cities and major towns around the country promoting the pensions “Time for Action” message.

  35. NPAW 2007 Thursday 15th March Women and Pensions Day The Pensions Board in co-operation with the National Women’s Council held a breakfast briefing in the Avoca Café on Suffolk Street to promote the importance of pension provision for women.

  36. NPAW 2007 Friday 16th March International Pensions Day The Pensions Board launched its updated Pensions Checklist and Pensions Calculator which are now interactive and available in eight languages on the Board’s website.

  37. NPAW 2007 Saturday 17th March Young Pensioners Day The Pensions Board hosted a major competition for young people to win tickets to Music Festivals over the weekend schedule on radio 2FM and on Tom Dunne’s Show on Today FM. The emphasis was to drive traffic to the pension calculator on the website. Over 2500 entries for the iPod competition alone on the Boards website.

  38. NPAW 2007 Sunday 18th March Pension Adequacy Day The Pensions Board constantly covers the issues relating to adequacy in all press and radio interviews throughout the year and during NPAW.

  39. NPAW 2007 * NPAW 06 was in May ** 38,000 at 21st March

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

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