The Irish Pensions Experience

Dutch DelegationWednesday 10 December 2008

David Malone and Andrew NugentInformation ServicesThe Pensions Board

The Pensions Board

Established by the Pensions Act, 1990

• Main functions are set out in the Act and include– to monitor and supervise the operation of the Act and pension

developments generally

• Board has 2 statutory roles – regulatory and policy

• Promoting pensions development, information and awareness is an associated support function.

• Board conducts the National Pensions Awareness Campaign (NPAC) on behalf of Government as recommended in the “Securing Retirement Income” report of the National Pensions Policy Initiative published in 1998

The Pensions Board Focus

Three key operational areas:

• Supervision, regulation and enforcement

• Policy, legal and actuarial

• Information and awareness

Company Pension Scheme (99,802 schemes with 800,398 members)(66% DB schemes and 34% DC schemes)

Personal Retirement Savings Accounts (PRSAs)(Over 140,000 PRSAs with asset value of €1.24 billion- June 2008)(86,613 employers had signed up with a PRSA provider )

Personal Pension Plans and Retirement Annuity Contracts (RACs) (In excess of 200,000 contracts – Irish Insurance Federation)

Fund assets approximately €80 billion

Voluntary regime for supplementary pension provision

Types of Irish Private Pensions

Policy and Regulation

Andrew Nugent

Recent policy developments

• National Pensions Policy Initiative 1998

• National Pensions Review 2006

• Special Savings for Retirement 2006

Policy developments in action

• Review of Trusteeship (2006)– Report sent to Minister

– Recommendation of E-learning for trustees

– System being development

Current policy developments

• Green Paper on Pensions published in October 2007, followed by consultation phase which is now completed

• Commission on Taxation to consider how best the tax system can encourage long term savings to meet the needs of retirement

• Pensions also a commitment in Programme for Government

• Recent social partnership agreement which includes a commitment to produce legislation on the transfer of undertakings

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Regulation, Supervision and Enforcement

• Pensions Board taking tough approach for breaches of the Pensions Act

• Board recently obtained a High Court judgement against an Irish company for €186,000 in pension arrears

• On the spot fines regime in place since September 2007. Fine for each offence €2,000

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Board’s Powers

• Section 18 Authorisation – furnishing of information

• Section 58 Prosecution for non-remittance of deductions within 21 days

• Section 87 High Court order to have company pay ‘unpaid’ contributions to scheme

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Information Services

David Malone

Why have a pension?

Provision of regular income to replace earnings in retirement, or early retirement due to ill-health

Provision of lump sum benefit income for surviving dependants

Tax Reliefs

Income Tax and PRSI relief on employee contributions

Employer contributions not taxed as BIK (unless paid to PRSA)

Pension schemes do not pay income or capital gains tax on investment returns.

Part of your retirement benefit may be paid as tax-free cash sum

Tax Relief on Personal ContributionsThe maximum contribution rate as a percentage of total pay/net relevant earnings on which

you can receive tax relief is:

Highest age at any time during the tax year Limit Under 30 15% 30-39 20% 40-49 25% 50-54 30% 55-59 35% 60 and over 40%

Notes: Contributions will also be relieved from the PRSI and the HealthLevy, if you pay these charges. For tax purposes these contributions arelimited to earnings up to a maximum of €254,000 in any year.

Changing world we live in

We are Living Longer

More Contract Work

More mobility in careers

Changing work patterns

More Part Time Working

Single Parent Households

Smaller Families

Separation/Divorce

Changing demographics

2006 2026 2056

No’s at Work 2,000,100 2,268,000 2,125,000

Aged over 65 464,000 844,000 1,532,000

No’s at work per person over 65

4.3 2.7 1.4

Where will your income come from when you retire?

The current state social welfare pension is €223.30 per week (or € 11,611 per year)

…….will this be enough to meet all your needs in retirement?

Almost 80% of the Pensions Board Consumer Research sample said that the State old age pension would NOT meet their needs in retirement

National Pensions Action Campaign 2008

NPAC messages 2005 - 2008

• Emphasis on personal responsibility

• Workplace ideal location for engaging with pensions

• Call to direct action – Talk to your employer, trade

union, bank, building society, insurance company or

financial advisor about starting a pension

The Pensions messageSimplify the message Affordability Portability More straight forward than you think Employers obligations

National Pensions Awareness Campaign 2003 - 2008

Support Agencies promoting NPAC

Contact was made with the wide range of support Agencies who are assisting in delivering the NPAC message to their constituent clients and members.

These include:Irish Congress of Trade Unions (ICTU) Irish Business and Employers Confederation (IBEC)Small Firms Association (SFA)Chambers of Commerce in Ireland (CCI)Irish Small and Medium Enterprises (ISME)Institute of Personnel and Development

Other organisations and group involved in this process include:Citizen Information Centres Irish Farmers Association / Irish Country Women’s AssociationNational Library NetworkRural Leader GroupsArea Partnership CompaniesIrish Hotels FederationLicensed Vintners AssociationRestaurants Association of Ireland

Pensions in the workplace

• A good pension scheme has been long recognised as a very valuable asset for both the company and its employees.

• There is a stronger commitment from employees to participate in pension schemes where the employer makes a contribution.

• A company benefits from having:– a reputation and respect as a good employer.– a workforce that feels valued and important– increased loyalty and commitment from staff– an enhanced staff recruitment, reward and retention

package

Employers’ Obligations/ Opportunity

Access for all Employees

– By law an employer must provide ALL employees with some form of access to a pension, whether they are in full-time, part-time, temporary, contract or casual employment.

– All employers regardless of the size of their workforce are obliged to provide access to a Standard PRSA if those employees fall into the category of “excluded employees” (details available on the Board’s website).

– Pensions Board encourages employers to regard pensions as part of the recruit, reward & retain approach to staff

– Pensions Board also encourages all employees to ask the employer about their pension rights

Financial Planning Education Initiatives

The Pensions Board is directly involved in the following educational related initiatives:

• Joint ventures with FAS and Fáilte Ireland (National State Training Authorities)

• National Recruitment Federation with over 100 private sector recruitment agency members

• Information stands at education events

Challenges – Pensions aren’t exciting!

Key barriers to pension take-up included:

• Heavy complicated pensions language

• Absence of pensions from mainstream consumer media

• Absence of pensions from general conversation

Case-studyAgriculture and Rural Sector

2002 - 3rd lowest pension coverage of all sectors at 32%

Strategy

• to understand and communicate directly with this audience

Activities

• joint venture with farming associations

• advertising and editorial coverage in farming publications

•conducted promotional activities at farming events

Result

•2008 saw pension coverage rates in this sector at 45%

More information…..

The Board’s website for

Information – Checklists - Calculators

Contact us by phone or e-mail on

01 - 613 1900

e-mail: info@pensionsboard.ie

We all have a responsible role to play in…..

….actively promoting pensions take up !