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Reinventing Retirement: Balancing Risk. THE IRISH PENSION MODEL. Anne Maher Chief Executive Washington DC The Pensions Board 19 July 2005 Ireland. Agenda. Background Current Irish pension model Issues arising for private pensions

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The irish pension model

Reinventing Retirement:Balancing Risk


Anne Maher

Chief Executive Washington DC

The Pensions Board 19 July 2005



  • Background

  • Current Irish pension model

  • Issues arising for private pensions

  • National Pensions Review in progress

  • Conclusion


  • No agreed national pensions policy prior to 1998

  • National pensions consultation and research project called the National Pensions Policy Initiative (NPPI) from 1996 to 1998

  • NPPI culminated in report to Government in 1998 recommending pension reform package

  • NPPI recommendations now implemented

  • Pensions part of Social Partnership Agreements

Current irish pension model
Current Irish Pension Model

  • First Pillar

    • State universal basic benefit

  • Private Pensions

    • Private voluntary supplementary benefit

Current irish pension model1
Current Irish Pension Model

First Pillar

  • Flat benefit

  • Old Age Contributory Pension of 32% average industrial earnings subject to contribution conditions

  • Old Age Non-Contributory Pension subject to means test for those not qualifying for contributory pension

  • Funded on pay-as-you-go basis supported by National Pensions Reserve Fund

  • Generally sustainable

  • Avoids poverty

  • Aims to provide replacement income for 30% lower paid

Current irish pension model2
Current Irish Pension Model

Private Pensions

  • Voluntary

  • Funded except for Public Service

  • DB/DC ratio is 2:1

  • Occupational pension schemes, personal pensions, Personal Retirement Savings Accounts

  • Covers 52.4% of employed people

  • Aims to provide supplementary pensions for 70% higher paid

  • Supported by tax reliefs and pensions awareness campaign

  • Public Service pension: good benefits/almost universal coverage/ pay-as-you-go supported by National Pensions Reserve Fund

Issues arising for private pensions
Issues Arising for Private Pensions

  • Coverage needs to increase to approximately 70% of over 30s at work

  • Defined benefit to Defined contribution – shift of risk

  • Adequacy of pension contributions – average contribution is 5% employer/ 5% employee

  • Funding of Defined Benefit schemes – over 40% of DB schemes have deficiencies

  • Employer concern over costs

  • Pensions an issue for Government, employers, trade unions

  • EU Pensions Directive may be catalyst for change

National pensions review
National Pensions Review

  • Statutory requirement to review progress in 2006

  • Brought forward to 2005

National pensions review1
National Pensions Review


  • Review of NPPI strategic recommendations

  • Review of coverage targets

  • Review of current private pensions position

  • Options to address coverage and adequacy

National pensions review2
National Pensions Review

Criteria for Pension Model

  • Coverage

  • Adequacy

  • Cost

  • Simplicity

  • Continuity

  • Modernisation

  • Redistribution

  • Competitiveness

  • Choice

  • Robustness

  • Acceptability

National pensions review3
National Pensions Review

State earnings related


Combining 1st & 2nd Pillar

State DC

Flat benefit

Private mandatory

Private voluntary

Defined contribution

No second pillar

National pensions review4
National Pensions Review

Pension models for Further Investigation

  • Enhancement of current voluntary model

  • Mandatory supplementary private model

  • Mandatory supplementary State defined contribution model

  • Mandatory supplementary State earnings-related model

  • Enhanced First Pillar pension, voluntary supplementary provision

National pensions review5
National Pensions Review

Associated issues being considered

  • Benefit options at retirement

  • State involvement in private pensions provision

  • Possible enhancements to voluntary provision

  • Retirement age and longevity

  • State support and equity

  • Female coverage

  • Governance (insofar as it affects coverage and adequacy)

In conclusion
In Conclusion

  • Agreed national pensions strategy supported by Government, employers, trade unions and pensions industry

  • Pensions not a ‘party political’ issue

  • Regular monitoring of progress and flexibility for change

  • Public pension awareness – supported by media role

  • Pension model influenced by culture, governance, economic and social considerations

    And there is no universal model