national pensions review report of the pensions board launch of report by minister seamus brennan td...
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NATIONAL PENSIONS NATIONAL PENSIONS REVIEWREVIEW
Report of the Pensions BoardReport of the Pensions Board
Launch of Report
by Minister Seamus Brennan TD
on 17 January, 2006
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AgendaAgenda
Background/Overview Targets / Current position Options Related Issues Recommendations
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BackgroundBackground
Statutory Review not later than September 2006
Minister’s request (February 2005)
Final Report (October 2005)
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OverviewOverview
Report
Reviews agreed pension targets
Reviews current coverage and adequacy
Considers how to sustain Social Welfare pension
Considers options to meet targets
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OverviewOverview
Key messages
Significant cost increase for Social Welfare pension
Good pension provision costs a lot
Changes need to be made
Should build on existing good base
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TargetsTargets Targets reviewed
• 50% pre-retirement income replacement
• 34% GAIE Social Welfare pensions
• 70% over 30s in workplace supplementary pension coverage
Targets broadly accepted
Most believe agreed targets would not be met without change
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Current Position – Social WelfareCurrent Position – Social Welfare
2005 Old Age (Contributory) Pension is
• €179.30 per week
• 32% of 2004 GAIE of €560.77 per week
2006 Old Age (Contributory) Pension is
• €193.30 per week
• 33% of estimated GAIE of €588 per week
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Current Position – Social WelfareCurrent Position – Social Welfare Significant increase in Social Welfare cost
Projected cost of first pillar pensions as a % of GNP
2006 2016 2026 2036 2046 2056
3.0% 3.7% 4.9% 6.5% 8.7% 10.1%
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Current Position – Social WelfareCurrent Position – Social Welfare Projected ratio of those at work to those
aged over 65
2006 2016 2026 2036 2046 2056Nos. at work (000) 2,001 2,213 2,268 2,268 2,170 2,125Aged over 65 (000) 464 620 844 1,105 1,403 1,532No. at work per person aged over 65 4.3 3.6 2.7 2.1 1.5 1.4
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Current Position – Social Welfare Current Position – Social Welfare Projected life expectancy at 65
2006 2016 2026 2036 2046 2056
Men 16.0 17.6 19.2 20.6 21.3 22.0
Women 19.4 20.9 22.4 23.9 24.6 25.3
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OptionsOptions Options to sustain Social Welfare pension
module
• Increase retirement age
• PRSI / Taxation increases
• Increase payment to NPRF
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Current Position – Supplementary Current Position – Supplementary PensionsPensions
59% of over 30s in the workforce have supplementary pension coverage
52% of the total workforce have supplementary pension coverage
No progress towards adequacy target
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OptionsOptions
Enhancements to Voluntary System
Mandatory Pensions
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OptionsOptions
Enhancements to Voluntary System
All Board recommended immediate enhancements to current system
All Board believe enhancements would achieve improvements
Some believe enhancements would achieve targets
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RecommendationsRecommendations
State incentive for personal contributions to PRSAs changed to matching contribution (SSIA style)
• Basis to be €1 state incentive for each €1 invested
• Limited access to fund before age 45
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RecommendationsRecommendations Tax relief at higher rate for all personal
contributions
Reduction of point of sale regulation for Standard PRSAs
Incentives to encourage SSIA proceeds to be saved for retirement targeted at those:• Otherwise not qualifying for tax relief
or• Who have not recently fully availed of tax relief
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RecommendationsRecommendations
Cap on incomes for contribution/benefit purposes supported provided derived savings used to improve incentives for lower-paid
Option of deferring drawing Social Welfare pension to be available
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Mandatory Pension ProvisionMandatory Pension Provision
Considered issue in general rather than design a system
There are many differing views among the Board
Could be summarised as an issue of cost versus certainty
Some Board members believe mandatory should be considered urgently
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Related IssuesRelated Issues
State Retirement Support
State-sponsored annuities for Defined Benefit / members / schemes
State-provided annuities for holders of small (PRSA/other) funds
State guarantee to holders of Standard PRSAs
Most Board members believe that State retirement support should be pursued vigorously
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Related IssuesRelated Issues
Funding Standard for DB schemes
Pension Protection Fund
Long-term care
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Recommendations for Immediate Recommendations for Immediate ImplementationImplementation
SSIA style tax delivery for PRSAs
Higher rate tax for all personal pension contributors
Reduced Standard PRSA regulation
Incentives on SSIA proceeds
Retirees option to defer Social Welfare pension
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Recommendations for Further Recommendations for Further ConsiderationConsideration
Others, including
Progress review in 2008
Research on women’s coverage
Regular projection of pension costs
Automatic enrolment
Pensions awareness campaigns
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ConclusionConclusion
Board thanks Minister for opportunity
Believes Report will contribute to future decisions on pension policy
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