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NATIONAL PENSIONS REVIEW Report of the Pensions Board

NATIONAL PENSIONS REVIEW Report of the Pensions Board. Launch of Report by Minister Seamus Brennan TD on 17 January, 2006. Agenda. Background/Overview Targets / Current position Options Related Issues Recommendations. 2. Background. Statutory Review not later than September 2006

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NATIONAL PENSIONS REVIEW Report of the Pensions Board

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  1. NATIONAL PENSIONS REVIEWReport of the Pensions Board Launch of Report by Minister Seamus Brennan TD on 17 January, 2006

  2. Agenda • Background/Overview • Targets / Current position • Options • Related Issues • Recommendations 2

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

  4. 4

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

  6. 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

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

  8. Current Position – Social Welfare • 2005 Old Age (Contributory) Pension is • €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

  9. Current Position – Social Welfare • Significant increase in Social Welfare cost • Projected cost of first pillar pensions as a % of GNP 9

  10. Current Position – Social Welfare • Projected ratio of those at work to those aged over 65 10

  11. Current Position – Social Welfare • Projected life expectancy at 65 11

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

  13. Current Position – Supplementary Pensions • 59% of over 30s in the workforce have supplementary pension coverage • 52% of the total workforce have supplementary pension coverage • No progress towards adequacy target 13

  14. Options • Enhancements to Voluntary System • Mandatory Pensions 14

  15. 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

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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

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

  22. 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

  23. Recommendations for Further Consideration • Others, including • Progress review in 2008 • Research on women’s coverage • Regular projection of pension costs • Automatic enrolment • Pensions awareness campaigns 23

  24. Conclusion • Board thanks Minister for opportunity • Believes Report will contribute to future decisions on pension policy 24

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