The National Pensions Review: Policy Options and Recommendations

1. The National Pensions Review: Policy Options and Recommendations Anne Maher Chief Executive The Pensions Board 29 March 2006

2. Agenda • Background • Key Messages • Current Position • Policy Options • Recommendations • What Happens Next? 2

3. Background • National Pensions Policy Initiative 1996 - 1998 • Subsequent Progress and Issues • Statutory Review required by September 2006 • 2006 Review brought forward to 2005 as the “National Pensions Review”. 3

4. Background National Pensions Review Report • Reviews agreed pension targets • Reviews current coverage and adequacy • Considers how to sustain State pension • Considers options to meet targets 4

5. Key Messages • Significant cost increase for State pension • Good pension provision costs a lot • Changes need to be made • Should build on existing good base 5

6. Current Position - Targets • Targets reviewed • 50% pre-retirement income replacement • 34% GAIE State pensions • 70% over 30s in workplace supplementary pension coverage • Targets broadly accepted • Most believe agreed targets would not be met without change 6

7. Current Position – State Pension • Significant increases in Social Welfare cost • Projected cost of first pillar pensions as a % of GNP 7

8. Current Position – State Pension • Projected ratio of those at work to those aged over 65 8

9. Current Position – State Pension • Projected life expectancy at 65 9

10. Policy Options – State Pension • Options to sustain State pension module • Increase retirement age • PRSI/Taxation increases • Increase payment to NPRF 10

11. Current Position – Supplementary Pension • 58.6% of over 30s in the workforce have supplementary pension coverage • 51.5% of the total workforce have supplementary pension coverage • No progress towards adequacy target 11

12. Policy Options – Supplementary Pension • Enhancements to Voluntary System • Mandatory Pensions 12

13. Policy Options – Supplementary Pension 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 13

14. Policy Options – Supplementary Pension Mandatory Pension Provision • Considered issue in general rather than design 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 14

15. 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 15

16. Issues Identified for Further Consideration • 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 • Funding Standard for DB Schemes • Pension Protection Fund • Long Term Care 16

17. What Happens Next? • Finance Bill 2006 introduces • incentive for transfer of SSIA monies to pensions by lower income holders, and • increased tax limits for pension contributions for over 55s • 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 17

18. In Conclusion • National Pensions Review is ‘work in progress’ and • Must lead to change 18