OVERVIEW OF OCCUPATIONAL PENSIONS

AND PRSAs

12 November 2004

Aongus HorganAssistant Head of Information & Training

2

OVERVIEW

Pension Awareness

Pension Arrangements in Ireland

Role of Board

Why a Pension

Predictions

Pensions Timebomb

CSO Survey

Start Early

Occupational Pensions

PRSAs

Other Organisations

Future Direction

Next Steps

3

PENSION AWARENESS

Awareness of Pensions

Complexity

Asking Questions

4

PENSION ARRANGEMENTS IN IRELAND

Social Welfare Pension

Contributory Pension

Non-contributory Pension

Regulated by Dept. Social & Family Affairs

Retirement AnnuityContract/Personal Pension

Individual Arrangements

e.g. Self-Employed

Irish Financial Services Regulatory Authority (IFSRA)

Occupational Pension

Public Sector/Private Sector

Defined Benefit Can be Defined Benefit or Defined Contribution

Regulated by the Pensions Board

PRSA

Individual Arrangements

Everybody

First time productRegulated and Approved by

PB/Revenue

See Pensions Board Booklet ‘What are my pension options’ (Appendix C) in relation to complaints and powers of the Pensions Ombudsman

5

ROLE OF THE PENSIONS BOARD

Regulation/supervision of occupational pension schemes and Personal Retirement Savings Accounts (PRSAs)

Advice to Minister for Social Affairs on pension matters generally

Development of private pension provision through information and awareness

Use enforcement powers to ensure compliance

6

PREDICTIONS

The telephone has too many shortcomings … as a means of communication … the device is inherently of no value

- Western Union Internal Memo 1876

Aeroplanes are interesting toys but of no military power

- Field – Marshal Foch (date unknown)

I think there is a world market for maybe 5 computers

- T. Watson Chairman 1943

7

WHY A PENSION

Holidays

€167 Vs AIW

Tax benefits

Save €100 (higher tax payer) saving €48

Save €100 (lower tax payer) saving €26

8

A DEAD FISH………….

9

PENSIONS TIME BOMB

Ratio workers to pensioners- 11% over age 65- 28% over age 65

Longevity – USA – 1900 age 48 Japan today age 90+

Replacement Ration

Age of Retirement- Greenspan – 73- Warner Buffet – 76

10

CSO QUARTERLY NATIONAL HOUSEHOLD SURVEY 7/9/2004

Private pension coverage 52.4%

Men 56.3% Women 46.8%

South West 50.4%

Under 24 25.2%

Catering 12.5%

Agriculture 15.8%

11

START EARLY

21 year old woman on €21,000 save €35 per week to get 2/3 pension

42 year old €42,000 per week save €310 per week to set a 2/3 pension

Women live longer

Pensions Board calculator

- www.pensionsboard.ie

- 1890-65-65-65

12

OCCUPATIONAL PENSION SCHEMES IN IRELAND

112,685 occupational (i.e. employers) pension schemes

724,333 members in occupational pension schemes

Overall membership is increasing

13

OCCUPATIONAL PENSION SCHEMES

Employees in Private/Commercial Public Sector

Employer(s) establish schemes on voluntary basis

Scheme must be set up as a trust

Separate from employer’s business

Trustees responsible for administration

Schemes financed on a pre-funded basis – resources set aside in a trust fund for payment of penisons, when due

14

PRSA STATISTICS AT 30 SEPTEMBER 2004

Total value of assets €106 million approximately

Total number of Contracts sold 37,086

Standard 29,373

Non-standard 7,713

Total number of employers who have designated a PRSA provider 66,486

15

WHAT IS A PRSA?

Simple contract between a PERSON and a PRSA PROVIDER

PERSON: employees, self-employed, homemakers, carers, unemployed or any other category of person

PRSA PROVIDER: an investment firm, a life office or a credit institution whichproduces , markets or sells PRSA products

16

WHAT IS A PRSA?

Investment account to save for retirement

2 types of PRSAs

Standard PRSA

- 5% of contributions paid 1% per annum of fund

Non-Standard PRSA

- no maximum limits on charges

17

PRSA PROVIDERS WITH APPROVED PRODUCTS

Ark Life Assurance Company Limited,Canada Life Assurance (Ireland) Ltd,Custom House Capital Limited,Eagle Star Life Assurance Company of IRL Ltd,EBS Building Society,Friends First Life Assurance Company Ltd.Hibernian Life & Pensions Ltd,Irish Life Assurance plc,New Ireland Assurance Company plc,The Standard Life Assurance Co.

56 products – 23 Standard and 33 Non – Standard

See Pensions Board website www.pensionsboard.ie

18

KEY FEATURES of a PRSA

All PRSA products approved by Pensions Board and Revenue Commissioners

All offer a Default Investment Strategy (DIS)

Tax relief on Contributions

Portable

Transferable

Flexible

Benefits determined by amount of contributions put in and how investments perform

Benefits at retirement

19

EMPLOYERS – WHAT THEY MUST DO

MUST have provided access by 15 September 2003 IF

You have NO PENSION SCHEME

OR

Your PENSION SCHEME does not cover ALL EMPLOYEES for pension benefits (“excluded employees”)

OR

You do not have an AVC arrangement

20

OTHER ORGANISATIONS

Ombudsman

- financial redress to individuals

- where they have lost through maladministration

- to decide on questions of fact or law

Department of Social & Family Affairs

- OACP

- RP

- OANCP

21

FUTURE DIRECTION

Review of Funding Standard

Ireland has an agreed national pensions strategy

Strategy is supported by Government, employers, trade unions and pensions industry

Steady PRSA progress

Progress report to Oireachtas (Irish Parliament) in Autumn 2006

2006 progress report likely to trigger debate on strategy.

22

NEXT STEPS

Review your pension arrangement/requirements

You can’t hide from your financial future

Booklets

Pensions Board website www.pensionsboard.ie

LoCall 1890 65 65 65