SIPTU National Executive Council NATIONAL PENSIONS REVIEW and

SIPTU National Executive Council NATIONAL PENSIONS REVIEW and SUBSEQUENT PROGRESS Brendan Kennedy – Actuarial Adviser Anne Maher – Chief Executive Jerry Moriarty – Head of Investigations & Compliance The Pensions Board 24 February 2006

Agenda § § § Background/Overview Targets / Current position Options Related Issues Recommendations Progress 2 2

Background § Statutory Review not later than September 2006 § Minister’s request (February 2005) § Final Report (October 2005) 3 3

NATIONAL PENSIONS REVIEW The Report 4

Overview Report § Reviews agreed pension targets § Reviews current coverage and adequacy § Considers how to sustain Social Welfare pension § Considers options to meet targets 5 5

Overview Key messages § Significant cost increase for Social Welfare pension § Good pension provision costs a lot § Changes need to be made § Should build on existing good base 6 6

Targets § Targets reviewed • 50% pre-retirement income replacement • 34% GAIE Social Welfare pensions • 70% over 30 s in workplace supplementary pension coverage § Targets broadly accepted § Most believe agreed targets would not be met without change 7 7

Current Position – Social Welfare § 2005 Old Age (Contributory) Pension was • € 179. 30 per week • 32% of 2004 GAIE of € 560. 77 per week § 2006 Old Age (Contributory) Pension is • € 193. 30 per week • 33% of estimated GAIE of € 588 per week 8 8

Current Position – Social Welfare § Significant increase in Social Welfare cost § Projected cost of first pillar pensions as a % of GNP 2006 2016 2026 2036 2046 2056 3. 0% 3. 7% 4. 9% 6. 5% 8. 7% 10. 1% 9 9

Current Position – Social Welfare § Projected ratio of those at work to those aged over 65 2006 2016 2026 2036 2046 2056 Nos. at work (000) 2, 001 2, 213 2, 268 2, 170 2, 125 Aged over 65 (000) 464 620 844 1, 105 1, 403 1, 532 No. at work person aged over 65 4. 3 3. 6 2. 7 2. 1 1. 5 1. 4 10 10

Current Position – Social Welfare § Projected life expectancy at 65 2006 2016 2026 2036 2046 2056 Men 16. 0 17. 6 19. 2 20. 6 21. 3 22. 0 Women 19. 4 20. 9 22. 4 23. 9 24. 6 25. 3 11 11

Options § Options to sustain Social Welfare pension module • Increase retirement age • PRSI / Taxation increases • Increase payment to NPRF 12 12

Current Position – Supplementary Pensions § 58. 6% of over 30 s in the workforce have supplementary pension coverage § 51. 5% of the total workforce have supplementary pension coverage § No progress towards adequacy target 13 13

Options § Enhancements to Voluntary System § Mandatory Pensions 14 14

Options Enhancements to Voluntary System § All Board recommended immediate enhancements to current system § All Board believe enhancements would achieve improvements § Some believe enhancements would achieve targets 15 15

Recommendations § State incentive for personal contributions to PRSAs changed to matching contribution (SSIA style) • Basis to be € 1 state incentive for each € 1 invested • Limited access to fund before age 45 16 16

Recommendations § Tax relief at higher rate for all personal contributions § Reduction of point of sale regulation for Standard PRSAs § Incentives to encourage SSIA proceeds to be saved for retirement targeted at those: • Otherwise not qualifying for tax relief or • Who have not recently fully availed of tax relief 17 17

Recommendations § Cap on incomes for contribution/benefit purposes supported provided derived savings used to improve incentives for lower-paid § Option of deferring drawing Social Welfare pension to be available 18 18

Mandatory Pension Provision § Considered issue in general rather than design a system § There are many differing views among the Board § Could be summarised as an issue of cost versus certainty § Some Board members believe mandatory should be considered urgently 19 19

Related Issues State Retirement Support § State-sponsored annuities for Defined Benefit / members / schemes § State-provided annuities for holders of small (PRSA/other) funds § State guarantee to holders of Standard PRSAs § Most Board members believe that State retirement support should be pursued vigorously 20 20

Related Issues § Funding Standard for DB schemes § Pension Protection Fund § Long-term care 21 21

Recommendations for Immediate Implementation § SSIA style tax delivery for PRSAs § Higher rate tax for all personal pension contributors § Reduced Standard PRSA regulation § Incentives on SSIA proceeds § Retirees option to defer Social Welfare pension 22 22

Issues Identified for Further Consideration § Others, including • Progress review in 2008 • Research on women’s coverage • Regular projection of pension costs • Automatic enrolment • Mandatory pension provision • Pensions awareness campaigns • State Retirement support 23 23

Progress to Date § Finance Bill 2006 • Incentive for transfer of SSIA monies into RAC/ PRSAs/ AVCs by lower income holders • Increased tax limits for pension contributions for over 55 s 24 24

What Happens Next? § Government are considering response to National Pensions Review § Pensions is to be discussed at Partnership talks § Minister Brennan • Has asked Pensions Board to do work on mandatory pension option • Is holding a Pensions Forum to stimulate public debate and move issue forward 25 25

In Conclusion § National Pensions Review is ‘work in progress’ and § Must lead to change 26 26