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National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
National Pensions Framework Seminar
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National Pensions Framework Seminar

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  • 1. National Pensions Framework March 2010
  • 2. AGENDA • Background • Aims • Principles • Key Areas • Observations and Conclusions 2
  • 3. BACKGROUND • First Pensions Review  Late 80’s  Pensions Act • Second Pension Review – NPPI  Late 90’s  PRSAs • Third Pensions Review – NPF  2010  ? 3
  • 4. BACKGROUND • Pensions Green Paper - 2006 • Mandatory Pension Paper - 2007 • Commission on Taxation Report – 2009 • McCarthy Report – 2009  Public Sector pensions • Renewed Programme for Government – 2009  33% tax rate 4
  • 5. AIMS • Security • Equity • Choice • Clarity • Increase Coverage (low and Middle Incomes) • Ensure State Support is Equitable and Sustainable 5
  • 6. PRINCIPLES • Affordable and Sustainable • State Pension at 35% of Average Weekly Earnings • Improve both coverage and contributions • Equitable Tax incentives • Involve Employers, Employees and State • Support longer working by flexibility • Focus on Future; ignore Legacy issues 6
  • 7. AUTO ENROLMENT • Implementation date 2014 • State managed scheme • compulsory contributions equivalent to 8% of gross pay • Employee pays 4% from net pay • State pays 2% and employer pays 2% • Wage bills up 2% plus administration costs 7
  • 8. AUTO ENROLMENT • Contribution triggered if earnings exceed threshold • Example given: Trigger at €357 per week 8% of salary between €127 p.w. and €995 p.w. 8
  • 9. AUTO ENROLMENT The table is based on the following assumptions: 5% earnings growth; 7% investment returns; 22:1 annuity for pension; a 40 year employment career. These are reasonable assumptions over a 40 year period. 9
  • 10. AUTO ENROLMENT • Opt out after 3 months • Irrevocable after 6 months • Auto-renewal every 2 years – hassle for employers • Incentive - once off bonus payment after 5 years. 10
  • 11. AUTO ENROLMENT • Members are given a limited range of funds. • Funds are private sector chosen by competition. • Exemption for those in an employers defined contribution scheme which provides for the 8% contribution and the 2% employer’s portion. • The alternative funds available may be more attractive than the auto-funds. 11
  • 12. AUTO ENROLMENT Australian Experience • Introduced in 1992: to answer same issues • “resistance crumbled” • 9% and enjoys wide support • Employer contributes to scheme of employees choice • Several different types of arrangement – general and self administered 12
  • 13. AUTO ENROLMENT 2006 Green Paper • Predicted negative impact on GDP and GNP • Reduction in real disposable income • Impact on competitiveness • Savings would increase Government says: • 2014 only if economic conditions permit • It is conscious of cost to small firms • “the implementation of these proposals will be cognisant of the current and emerging economic situation” 13
  • 14. STATE PENSION • Social Insurance Fund decimated • Retirement age to increase gradually to 68 • Contributory pension based on total contributions made (currently average) • Home Carers to be recognised with credits • No credits for legacy issues (i.e. marriage bar) 14
  • 15. PRIVATE SECTOR • 33% Rate on Personal Contributions • DC Retirement Benefits Simplified • Multiplicity of Contracts to be reviewed  PRSAs, Personal Pensions, Buy-out Bonds • Defined Benefit Schemes  New model proposed • Pension Board  Powers to be reviewed • Info to Members; Funding Standard  Kept Under review 15
  • 16. 33% RATE • Applies to all personal contributions  To achieve greater equity? • 15%- 40% limits remain • €150,000 limit remains • Employer Contributions Unaffected • Pension Funds Remain Exempt 16
  • 17. BENEFITS • ARFS – available to all DC  Not to current Pensioners; DB  Implemented 2011 • Specified Income  To c. €18k  AMRF to end before 75 if this is exceeded • Tax Free Lump Sum same as Before  Taxation above €200k to be considered during implementation  25% or 1.5 x Salary? 17
  • 18. DEFINED BENEFITS • Possible new model • Fixed Contribution Rates • Flexible Benefits • Allow for Life Expectancy • All beneficiaries Revised Annually and Equally • Previous Underpayment due to Poor Investment to be caught up 18
  • 19. PENSION BOARD • Powers to be reviewed • Powers re Lifestyling • Licensing of Schemes • Info to Members  To be kept under review • Funding standard  To be kept under review 19
  • 20. PUBLIC SECTOR • New Scheme  New entrants only  Across all public and civil servants  Legislation by end 2010 • Benefits  in line with Private sector  Integrated with Social Welfare  Based on Career Earnings  Annual Accrual Rate  NRA 66 - 70 20
  • 21. PUBLIC SECTOR • Contributions at 6.5%  On all pensionable income • Fast accrual  Remains for Guards, Army  Added Years gone • Applies to TDs, Judges, President  in line with Private sector  Based on Career Earnings • Possible CPI for Existing Pensioners 21
  • 22. Miscellaneous • Flexible Working  State pension age to rise to 68 • Tracing benefits  Tracing mechanism  Possible Dormant pensions Fund • Financial Education  By the Banks!!  6 months Reports from IBF on Progress 22

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