1. National Pensions
Framework
March 2010

2. AGENDA
• Background
• Aims
• Principles
• Key Areas
• Observations and Conclusions
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3. BACKGROUND
• First Pensions Review
 Late 80’s
 Pensions Act
• Second Pension Review – NPPI
 Late 90’s
 PRSAs
• Third Pensions Review – NPF
 2010
 ?
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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
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5. AIMS
• Security
• Equity
• Choice
• Clarity
• Increase Coverage (low and Middle
Incomes)
• Ensure State Support is Equitable and
Sustainable
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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
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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
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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.
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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.
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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.
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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.
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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
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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”
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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)
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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
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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
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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?
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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
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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
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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
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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
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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
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