INSTITUTE OF EUROPEAN AFFAIRS IRISH PENSION REFORM ANNE

INSTITUTE OF EUROPEAN AFFAIRS IRISH PENSION REFORM ANNE MAHER Chief Executive The Pensions Board 21 April 2004

IRISH PENSION REFORM ªthrough National Pensions Policy Initiative (NPPI) 1996 -1998 ªfinalised by Pensions Board “Securing Retirement Income” Report to Minister ªcontained 97 recommendations 2

MAIN COMPONENTS ª increase in State Pension to 34% Average Industrial Earnings (AIE) to avoid poverty and provide replacement income for lower paid ª establishment of fund to partially fund future increases in State pension ª large range of changes in voluntary private pension system and in particular introduction of Ø new flexible pensions vehicle called Personal Retirement Savings Accounts (PRSAs) Ø mandatory employer access to PRSAs ª review after 3 years 3

IMPLEMENTED BY ª National Pensions Reserve Fund Act 2000 ª Pensions (Amendment) Act 2002 4

PROGRESS ª State pension steadily increasing (now 30 – 31% AIE approximately) ª National Pensions Reserve Fund up and running but with difficult investment environment ª Almost all recommended changes made to private system including Ø PRSAs available since Spring 2003 with slow but steady progress Ø Mandatory employer access in place for 59, 000 employers but some still non-compliant 5

SOME ISSUES ª continuing complexity in system ª public confidence weakened by equity market problem ª slow PRSA progress Ø excessive regulation? Ø not as simple as planned Ø need for full employer co-operation Ø need for incentive or some form of boost? ª National Pensions Reserve Fund Ø lack of public ‘ownership’ Ø need to keep to clear investment mandate 6

IN CONCLUSION ª Ireland has Ø Ø Ø clear agreed plan reasonable certainty support of Partnership less complexity than most reasonable public trust ª Irish model is Ø well thought of overseas Ø good base for Pan-European opportunities 7