National Pensions
      Framework
      March 2010
AGENDA




•   Background
•   Aims
•   Principles
•   Key Areas
•   Observations and Conclusions



                      ...
BACKGROUND

 • First Pensions Review
       Late 80’s
       Pensions Act

 • Second Pension Review – NPPI
       Late ...
BACKGROUND

 •   Pensions Green Paper - 2006
 •   Mandatory Pension Paper - 2007
 •   Commission on Taxation Report – 2009...
AIMS

  • Security
  • Equity
  • Choice
  • Clarity
  • Increase Coverage (low and Middle
    Incomes)
  • Ensure State S...
PRINCIPLES

  • Affordable and Sustainable
  • State Pension at 35% of Average Weekly
    Earnings
  • Improve both covera...
AUTO ENROLMENT

• Implementation date 2014
• State managed scheme
• compulsory contributions equivalent to 8% of
  gross p...
AUTO ENROLMENT



• Contribution triggered if earnings exceed
  threshold


• Example given:
   Trigger at €357 per week
 ...
AUTO ENROLMENT




The table is based on the following assumptions: 5% earnings growth; 7% investment returns; 22:1 annuit...
AUTO ENROLMENT


• Opt out after 3 months

• Irrevocable after 6 months

• Auto-renewal every 2 years – hassle for
  emplo...
AUTO ENROLMENT


• Members are given a limited range of funds.

• Funds are private sector chosen by competition.

• Exemp...
AUTO ENROLMENT
Australian Experience

• Introduced in 1992: to answer same issues

• “resistance crumbled”

• 9% and enjoy...
AUTO ENROLMENT
2006 Green Paper
• Predicted negative impact on GDP and GNP
• Reduction in real disposable income
• Impact ...
STATE PENSION


• Social Insurance Fund decimated

• Retirement age to increase gradually to 68

• Contributory pension ba...
PRIVATE SECTOR


  • 33% Rate on Personal Contributions
  • DC Retirement Benefits Simplified
  • Multiplicity of Contract...
33% RATE

  • Applies to all personal contributions
         To achieve greater equity?

  •   15%- 40% limits remain
  •...
BENEFITS

  • ARFS – available to all DC
        Not to current Pensioners; DB
        Implemented 2011

  • Specified I...
DEFINED BENEFITS

  • Possible new model
  • Fixed Contribution Rates
  • Flexible Benefits
  • Allow for Life Expectancy
...
PENSION BOARD

 •   Powers to be reviewed
 •   Powers re Lifestyling
 •   Licensing of Schemes
 •   Info to Members
     ...
PUBLIC SECTOR

  • New Scheme
        New entrants only
        Across all public and civil servants
      Legislation ...
PUBLIC SECTOR

  • Contributions at 6.5%
        On all pensionable income

  • Fast accrual
        Remains for Guards,...
Miscellaneous

  • Flexible Working
        State pension age to rise to 68

  • Tracing benefits
        Tracing mechan...
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National Pensions Framework Seminar

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National Pensions Framework Seminar

  1. 1. National Pensions Framework March 2010
  2. 2. AGENDA • Background • Aims • Principles • Key Areas • Observations and Conclusions 2
  3. 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. 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. 5. AIMS • Security • Equity • Choice • Clarity • Increase Coverage (low and Middle Incomes) • Ensure State Support is Equitable and Sustainable 5
  6. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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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