Transcript Document

The Sunday Business Post
Property, Lifestyle and Investment Expo
October 13-15 2006
RDS Dublin
Agenda
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The Pensions Board
Why have a pension?
Tax Relief on Personal Contributions
Types of Irish Private Pensions
Company Pension Schemes and Benefits
Personal Retirement Savings Accounts (PRSAs) and Benefits
Personal Pension Plans (RACs) and Benefits
SSIA Incentives
Some Facts
National Pensions Awareness Campaign (NPAC) 2003-2006
The Pensions Board
Established by the Pensions Act, 1990
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Main functions are set out in the Act and include
– to monitor and supervise the operation of the Act and pension
developments generally
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Board has 2 statutory roles – regulatory and policy
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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 €193.30
per week (or € 10,051 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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The current state social welfare pension is €193.30 per week
(or €10,051 per year)
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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
Limit
Under 30
15%
30-39
20%
40-49
25%
50-54
30%
55-59
35%
60 and over
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.
Types of Irish Private Pensions
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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))
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Personal Retirement Savings Accounts (PRSAs)
(78,043 PRSAs with asset value of €544.76m - end June 2006)
(78,590 employers had signed up with a PRSA provider )
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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
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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.
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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’
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’
SSIAs and Pensions
• New SSIA Related Pension Incentive – Finance Act 2006
• Applies to incomes < €50,000
• Tax Credit of €1 for every €3 invested up to a max €2,500 –
Invest €7,500 and get €2,500 from State.
• Amount transferred from SSIA not subject to 23% exit tax.
• Scheme operates from 1 June 2006
• See – SSIA Pension Incentive on revenue.ie
The Facts
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Only 54.2% of men in the Irish workforce
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Only 47.5% of women in the Irish workforce
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Less than 16% of those working in
 the agricultural industries including farming
 working seasonal & part-time
 working in the catering & tourism industries
…have private pensions
Consumer Research and
Awareness Audits
The key barriers to starting a pension for most people are:
• Can’t afford one
• house/holiday/car etc are the immediate priority
• Too young to start a pension
• Too complicated don’t understand pensions
Changing World We Live In
We are Living Longer
More Contract Work
More Part Time Working
Single Parent Households
Smaller Families
Separation
Divorce
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
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).
Start your pension early
• a man retiring at 65 now can expect to
live to 81
• a woman retiring at 65 can expect to live
to 84
….that’s nearly 20 years in retirement !