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MMK Espresso Business Briefing : Pensions Update with Maura Howe


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Morgan McKinley hosted the latest in their Espresso Business Briefings with Maura Howe, Assistant Head of Policy Irish Pensions Board giving a comprehensive update on the Pensions Landscape

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MMK Espresso Business Briefing : Pensions Update with Maura Howe

  1. 1. Pensions and the WorkplaceTomorrow is only a day away Tuesday 9 April 2013 Maura Howe The Pensions Board
  2. 2. Pensions and the Workplace Agenda• The Pensions Board• Why Have a Pension?• Pensions in the Workplace • Employers Obligations • On-the-spot Fines • Criminal Offences • Planning for retirement•Pension into the future•Your Pension•RecapQuestions & Answers
  3. 3. The Pensions BoardEstablished by the Pensions Act, 1990
  4. 4. Why have a Pension?Life expectancy is increasing - the average person retiring today aged 65 has a life expectancy of 20 - 23 yearsWhat kind of lifestyle do you want in retirement and how will you fund it? Current State pension = €230.30 per weekConsumer Market research shows that approximately 8 out of 10 people say - that the State pension will not meet all their needs in retirement Pension = Income in RetirementTax Relief on Pensions Income Tax and PRSI relief on employee contribution Part of your retirement benefit may be paid as tax-free cash sum
  5. 5. 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%Note: Contributions will also be relieved from the PRSI and the Health Levy, if you pay these charges. Visit the Pensions Calculator on
  6. 6. Changing Demographics
  7. 7. Getting to grips with Pension TermsOccupational Pensions Defined contribution schemes Retirement Annuity Contracts (RACs) Personal Retirement Savings Accounts (PRSAs) Defined benefit schemes Private Pensions
  8. 8. The Pensions system in Ireland• Pillar 1: State pension – Contributory pension of maximum of €230.30 per week = 35% of average earnings (Non-statutory political commitment to maintain at this level) – Means-tested non-contributory pension of €219 per week – Aim is essentially one of poverty prevention• Pillar 2: Occupational pension schemes – Employer sponsored Defined Benefit and Defined Contribution schemes – Operate on a funded basis (private sector) and pay-as you go basis (public service)• Pillar 3: Personal pensions Personal pension vehicles include: – Personal Retirement Savings Accounts (PRSAs) – two types standard and non-standard regulated by Board – Retirement Annuity Contracts (RACs) – insurance products• Total of pillars 2 and 3 pension fund assets = 45% of GDP - but account for just 25% of retirement income• 75% rely on the State pension
  9. 9. Pensions in the WorkplaceThere is no obligation on the employer to contribute to a pension but contributing can benefit the employer as follows –Recruitment• a pension is recognised as an important benefit• pensions can attract the best candidate for the positionReward and Retention• a workforce that feels valued and important• increased loyalty and commitment from staff• an enhanced staff recruitment, reward and retention packageOffering a pension can enhance the overall reputation and respect of the workplace as a good employer Key opportunity in promoting and communicating the benefits of the pension to employees
  10. 10. Employers’ ObligationsAccess for all Employees • By law an employer must provide ALL employees (whether they are in full-time, part-time, temporary, contract or casual employment) with access to a Personal Retirement Savings Account (PRSA) where a) there is no pension company pension scheme in place b) there is a company pension scheme but not all employees can access it c) there is a company pension scheme for death-in-service benefits or that doesn’t permit payment of Additional Voluntary Contributions (AVCs) by members • The employer provide the employee with contact details for the PRSA provider and allow them time during their working hours to make contact • If the employee decides to contribute to a PRSA with the designated provider the employer must facilitate this through payroll
  11. 11. On-the-spot finesCivil Penalties• Fines provision commenced 17 September 2007• Specified breaches are not new – mainly administrative in nature• Gives alternative to prosecution under the Act• More serious breaches continue to be dealt with by going to CourtAdministrative Breaches include:• Failure to register a scheme with Board• Failure to submit AFCs within the statutory deadlines• Failure to provide scheme members with certain information ( do not provide at least a monthly statement to employees showing employee contributions deducted and employer contributions paid in the previous month)• Failure to remit fees due to Board• Failure to respond to requests for information from the Board ( furnish information about their provision of access to a Standard PRSA for ‘excluded employees’)
  12. 12. On-the-spot finesOperation• If within 21 days of notice, offence is remedied to satisfaction of Board and fine is paid prosecution will not be instituted• Fine for each offence if €2,000 per trustee (or employer)• Fines cannot be paid out of the resources of the scheme or PRSA• Fines considerably increase Board’s ability to ensure and motivate compliance See Pensions Board Trustee and Employer Checklist on
  13. 13. Criminal OffencesRemittance of Pension ContributionsRemittance of pension scheme contributions including to DB and DC occupational schemes, PRSAs, and Additional Voluntary Contributions (AVCs) is obligatory.S58A (1) offences and S3(4) Offences• S58A(1) – non-remittance of employee contributions in statutory timeframe• S3(4) – also prosecute Director/ manager for consent/connivance/neglect• S18(5) – Failure to comply with PB request for information• Standard of proof – beyond reasonable doubt• Effect of proceeding is punitive, no resources restored to schemeSummary Proceedings• The District court has jurisdiction to hear summary proceedings brought by the Pensions Board (S3)• On summary conviction – fine not exceeding €5,000 or imprisonment for a term not exceeding one year or both
  14. 14. Trustee Training ObligationsEmployer Obligations for Trustee Training• As of 1 February 2010, under The Pensions Act employers must arrange for the trustees of their scheme (and, in the case of a trustee which is a body corporate, for all the directors of that body corporate) to receive appropriate training.Please Note: An employer is not required to arrange appropriate training for a pensioneer trustee, or a professional trustee. New: Investment Guidelines Fact Sheet for Trustees on
  15. 15. Pensions in the workplace Preparing for retirement during your working lifeIf you are not in the position to contribute to a pension there are other effective ways of demonstrating commitment to employees beyond the workplace• The workplace is the optimum location for pension provision and for pension information and education• Where the employer facilitates pension contributions through payroll the employee gets the tax relief benefit immediately on their wages/ salary whilst saving for retirement• Providing pension seminars and forums facilitated through the designated pension provider demonstrates the employer’s interest in the employee beyond the workplace and into the futureWhen engaging with the pension provider remind them of the importance of jargon-free, simple, plain English in all communicationsContact The Pensions Board for booklets & checklists, distribute an email with the link
  16. 16. Pensions – The Future Standardisation of the State Pension Age – From 1 January 2014, the State pension age will become: • 66 (for those born between 1 January 1949 and 31 December 1954) and the State Pension (Transition) will cease to exist – The State pension age will be increased to: • 67 in 2021 (for those born between 1 January 1955 and 31 December 1960), and • 68 in 2028 (for those born after 1 January 1961) – Employment retirement age and normal retirement age (NRA) for pension scheme purposes were generally aligned with the age the State Pension (Transition) became payable, i.e. 65. – From January 2014 – shortfall between 65 and 66 until State Pension is available – Employers and trustees should engage with employees in advance of this change and seek professional advice where necessary.  Auto-enrolment
  17. 17. Your Pension Keeping Track• It is important to keep track and monitor your pension while your contributing to it• Members of pension schemes should receive information regarding the operation and rules of the scheme plus details of benefits• Regular updates on the performance and plan for your scheme/fund should also be provided• You should make sure that your contributions will provide you with a pension that will be adequate for your needs in retirement – Pension Calculators• Fees and charges apply to pension schemes as a cost for services, do you know how much fees and charges are costing your scheme? Investment, Risk, Fees and Charges Checklist on
  18. 18. Pensions and the Workplace To Recap• We are all living longer• The earlier you start planning for retirement the better• The workplace is the optimum location for pension information• Company pension scheme offers opportunity for employers and staff• Helping staff to plan for retirement demonstrates the employers’ interest in the long term well being of the staff• HR play an important role in promoting the values of pensions as benefit and preparing for retirement• Get informed today it will help you, your employer & staff
  19. 19. Pensions Information ‘The Pensions Calculator’ Free Online Trustee ‘PRSA’s A consumer and Employers’ Training, Guidance & Guide FAQs, E-mail alerts & ‘What are my pension options?’ Trustee supports ‘Investment Guidelines’ ‘Your Pension Explained’ ‘Trustee & Employer On-the-spot Fines’ ‘Investments, Fees & Charges’ Enquiry service 01-6131900
  20. 20. Questions & Answers