Transcript Document

Private pensions training course for
Citizens Information Board
The Heritage Hotel, Portlaoise
Ciarán Holahan
Higher Executive Officer
Information Unit
The Pensions Board
[email protected]
The Pensions Board
Established by the Pensions Act, 1990
•
Main functions are set out in the Act and include
– to monitor and supervise the operation of the Act and pension
developments generally
•
Board has 2 statutory roles – regulatory and policy
•
Promoting pensions development, information and awareness is an
associated support function.
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Board conducts the National Pensions Awareness Campaign (NPAC)
on behalf of Government as recommended in the “Securing Retirement
Income” report of the National Pensions Policy Initiative published in
1998
Where will your income come from when
you retire?
The current state social welfare pension is €209.30 per week
(or € 10,883 per year)
…….will this be enough for you to live on ?
87% of the Pensions Board Consumer Research sample said that
the State old age pension would NOT meet their needs in
retirement
Why have a pension?
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Provision of regular income to replace earnings in retirement, or early
retirement due to ill-health
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Provision of lump sum benefit income for surviving dependants
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Tax Reliefs
 Income Tax and PRSI relief on employee contributions
 Employer contributions not taxed as BIK (unless paid to PRSA)
 Pension schemes do not pay income or capital gains tax on investment
returns.
 Part of your retirement benefit may be paid as tax-free cash sum
Tax Relief on Personal Contributions
The 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
Under 30
30-39
40-49
50-54
55-59
60 and over
Limit
15%
20%
25%
30%
35%
40%
Notes: Contributions will also be relieved from the PRSI and the Health
Levy, if you pay these charges. For tax purposes these contributions are
limited to earnings up to a maximum of €254,000 in any year.
Explanation of Tax relief benefits
EXAMPLE 1 – no pension contributions
Income:
€100
Tax of 20% on €100:
€20
Take home pay:
€80
EXAMPLE 2 – pension contributions made
Income:
€100
Pension contribution:
€20
Tax of 20% on remaining €80:
€16
Take home pay:
€64
Explanation of Tax relief benefits
• Lower tax rate (20%); Higher (42%)
• Higher rate tax payers will get even more
benefit
• PAYE workers will benefit from PRSI and
Health Levy relief also – up to 26% for
lower tax band and 48% for higher tax
band.
Types of Irish Private Pensions

Company Pension Scheme
(88,069 schemes with 726,405 members)
(68.9% DB schemes and 31.1% DC schemes)
(Fund assets in excess of €70 billion (estimate))

Personal Retirement Savings Accounts (PRSAs)
(Over 110,000 PRSAs with asset value of €1.06 billion- June 2007)
(82,467 employers had signed up with a PRSA provider )

Personal Pension Plans and Retirement Annuity Contracts (RACs)
(In excess of 200,000 contracts – Irish Insurance Federation)
Voluntary regime for supplementary pension provision
Company Pension Schemes
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Also known as Occupational Pension Schemes, sponsored by
employers on behalf of employees
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In private sector, funded arrangement set up under trust so funds held
separately from company assets
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In public sector usually ‘pay as you go’ unless commercial public sector
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Occupational Pension Schemes fall into 2 categories:
1. Defined Benefit
2. Defined Contribution
•
Operation of schemes is regulated by Pensions Act and monitored by
the Pensions Board
Occupational Pension Scheme Benefits
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Pension payable on retirement, usually 65, for your lifetime and taxed
under PAYE
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Once-off tax free cash sum on retirement of up to 1½ final salary
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A pension may be payable to your spouse/dependants/children on your
death, either before of after pension commences.
•
A lump sum may be payable on your death either before or after your
retirement
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A pension and/or lump sum may be payable if you retire in ill-health
See PB Information Booklets ‘What are my Pension Options?’
and ‘Women and Pensions’
Other issues
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Preservation (2 year rule)
Disclosure (statements, annual reports etc.)
Pensions Ombudsman
Remittance of contributions
Whistleblowing
Personal Retirement Savings
Accounts (PRSAs)
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For employees, self-employed, homemakers, carers, unemployed or
any other category
Contract between individual and PRSA provider – Investment
account holding units in investments managed by approved PRSA
provider
Two types –Standard PRSA and Non-Standard PRSA
Mandatory employer access
Usual tax reliefs applicable
Transfers to and from other pension arrangements are facilitated as
far as possible
Pension Board approves PRSA products and monitors activities of
PRSA providers
PRSA Benefits
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In general can take retirement benefit anytime from 60-75
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25% of fund as tax-free lump sum at retirement
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Number of options on how to use balance
1. Purchase annuity with life assurance company, or
2. Transfer value of assets to an Approved Retirement Fund (ARF)
subject to meeting the qualifying conditions. Withdraw funds as
required (taxed as PAYE) , or
PRSA Benefits
3. Retain funds in PRSA and opt to draw income as required (taxed as
PAYE). To avail of this option, a minimum of €63,500 must be used to
purchase annuity or kept in PRSA until age 75 unless minimum income
of €12,700 pa
4. On death before retirement – value of fund available as death benefit
payable as lump sum or pension or combination of both
5. On death after retirement benefits payable depend on options chosen
at time annuity purchased and if ARF in place.
Personal Pensions and Retirement
Annuity Contracts (RACS)
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Self-employed or those in non-pensionable employment can take out a
Personal Pension Plan aka Retirement Annuity Contract (RAC)
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Individual contract between individual and insurance company
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Can also effect a life assurance policy at some time to protect
dependants
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These plans are not covered by Pensions Act but are regulated by
Insurance Acts
Personal Pensions/RACs Benefits
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Options and benefits on death and on retirement much the same as
PRSAs
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May not normally retire ‘till age 60
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May retire at any stage in permanent ill-health
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See PB Information Booklets ‘What are my pensions options?’ ,
‘Women and Pensions’ and ‘PRSAs – a Consumer’s Guide’
Employers Play your Part
Access for all Employees
– By law an employer must
provide ALL employees with
some form of access to a
pension, whether they are in
full-time, part-time,
temporary, contract or casual
employment.
– All employers regardless of
the size of their workforce are
obliged to provide access to a
Standard PRSA if those
employees fall into the
category of “excluded
employees” (details available
on the Board’s website).
Pension Adjustment Orders (PAOs)
• PAOs do not apply for judicial separations or foreign divorces;
– if granted before 1/08/1996,
– Irish divorces granted before 27/02/1997
– for non judicial separations i.e. separation by agreement.
• A PAO designates part of the pension benefits
– to a non member spouse
– or person representing a dependent child.
PAOs - continued
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Separate PAOs can be made in relation to;
– retirement benefits (benefit payable to a member spouse)
– and contingent benefits (e.g. Death in service benefits).
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PAO in relation to contingent benefits must be made with 12 months of
judicial separation or divorce.
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General info on a spouse’s pension can be sought through the trustees
of the pension scheme.
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Personal info will be given on your spouses consent and if no consent
is given you may apply for a court order for info to be released.
PAOs - continued
• Court rules on 2 key factors – relevant period and relevant
percentage.
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A ‘designated benefit’ is awarded and will commence at same
time as member spouse unless an ‘independent benefit’ is
requested, i.e. transfer of a designated benefit either within the
scheme or to another scheme, to a bond, or a PRSA.
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Further info – see www.pensionsboard.ie and the Family Law
and Women & Pensions booklets
The Facts
– Only 61.8 % of the adult Irish workforce over 30 years of age
– Only 58.3% of men in the Irish workforce
– Only 50.6% of women in the Irish workforce
Less than 25% of those working in
– the agricultural industries including farming
– working seasonal & part-time
– working in the catering & tourism industries
….…have private pensions (Source: CSO Survey Dec 2006)
Changing Demographics
2006
2026
2056
No’s at Work
2,000,100
2,268,000
2,125,000
Aged over 65
464,000
844,000
1,532,000
4.3
2.7
1.4
No’s at work
per person over
65
More information…..
www.pensionsboard.ie
See Information booklets and ‘Guide to Pensions’
[email protected]
Information Unit: 01 613 1900
Thank you for your attention!
Any questions???