Transcript Document

The Irish Pensions Experience
TEEU Seminar
Wednesday 11 March 2009
Andrew Nugent
Information Services
The Pensions Board
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
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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
The Pensions Board Focus
Three key operational areas:
• Supervision, regulation and enforcement
• Policy, legal and actuarial
• Information and awareness
Types of Irish Private Pensions

Company Pension Scheme
(99,802 schemes with 800,398 members)
(66% DB schemes and 34% DC schemes)

Personal Retirement Savings Accounts (PRSAs)
(Over 140,000 PRSAs with asset value of €1.24 billion- June 2008)
(86,613 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)

Fund assets approximately €60 - €80 billion
Voluntary regime for supplementary pension provision
Recent policy developments
• National Pensions Policy Initiative
1998
• National Pensions Review 2006
• Special Savings for Retirement 2006
Current policy developments
• Green Paper on Pensions published in October 2007, followed by
consultation phase which is now completed
• Commission on Taxation to consider how best the tax system can
encourage long term savings to meet the needs of retirement
• Pensions also a commitment in Programme for Government
• Recent social partnership agreement which includes a commitment to
produce legislation on the transfer of undertakings
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Regulation, Supervision and
Enforcement
• Pensions Board taking tough approach for breaches
of the Pensions Act
• Board recently obtained a High Court judgement
against an Irish company for €186,000 in pension
arrears
• On the spot fines regime in place since September
2007. Fine for each offence €2,000
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Board’s Powers
• Section 18 Authorisation – furnishing of
information
• Section 58 Prosecution for nonremittance of deductions within 21 days
• Section 87 High Court order to have
company pay ‘unpaid’ contributions to
scheme
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Policy developments in action
• Review of Trusteeship (2006)
– Report sent to Minister
– Recommendation of E-learning for
trustees
– System being development
Trustees Responsibilty
 In broad terms, trustees’ main duties under the Act are:
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to ensure contributions are received
to ensure contributions are remitted
to invest the funds
to pay the benefits
to ensure that Funding Standard is met
to keep records and accounts
to preserve or transfer benefits
to disclose information
to ensure equal pensions treatment
to apply the resources of the scheme on wind up
to register the scheme with the Pensions Board
Key Recommendations – Trustee
Ability
To increase the standard of trustee ability, and
therefore good governance!
 Trustees Training
 Potential new means of training (e.g. e-learning)
should be explored
 Pension scheme administrators should be
registered and supervised
REGISTERED ADMINISTRATORS
 Implements the recommendations in the Board’s Report to the
Minister on Trusteeship
 Report noted that third party administrators were unregulated in
terms of scheme administration work undertaken on behalf of
trustees
 Recommended that scheme administrators should register with
Board who would then have responsibility to:
- audit administration service provision, and
- remove registration or apply sanctions if required standards
are not met
 Pensions Act amended to bring administrators within its remit in
relation to certain core functions they perform
SOCIAL WELFARE AND PENSIONS ACT, 2008
REGISTERED ADMINISTRATORS (RAS)
What’s Required?
 From 1 November 2008 trustees of every scheme (including
large Trust RACs) must appoint an RA to provide “core
administration functions”
 Core administration functions are:
- preparation of annual reports
- preparation of benefit statements
- maintenance of sufficient and accurate member records
to discharge above
 No RA qualification specified but RA must be satisfied they are
competent and capable of:
 providing core administration functions
 have systems and procedures in place to deliver
services
SOCIAL WELFARE AND PENSIONS ACT, 2008
REGISTERED ADMINISTRATORS (RAS)
What’s required
 Trustee can appoint themselves as RAs if they can fulfill above
requirements
 1 member schemes must appoint RA for benefit statement/
records/Eurostat information
 RA can apply to be registered for either or both core
administration functions and must maintain records for function
for which appointed
 RAs also required to provide statistical information for Eurostat
- applies to RA responsible for preparation of annual report if
more than 1 RA
SOCIAL WELFARE AND PENSIONS ACT, 2008
REGISTERED ADMINISTRATORS (RAS)
Registration Process
 Existing RAs registered with Board prior to 1 November 08
 New RAs must register before commencing business
- registration period lasts 12 months
 RAs must complete form indicating:
- schemes for which they are applying to be registered
(including “frozen” schemes)
- certify they are satisfied they are competent to provide
core administration functions to these schemes
 Overseas administrators must register as RA and provide
address in the State for service of notices and proceedings
SOCIAL WELFARE AND PENSIONS ACT, 2008
REGISTERED ADMINISTRATORS (RAS)
Registration Process
 RAs must renew their registration annually no
later than 30 days before anniversary of initial
registration or renewal
 No fee payable on registration or renewal
 Sample registration forms available on
Board’s website together with a note of
Eurostat requirements
SOCIAL WELFARE AND PENSIONS ACT, 2008
REGISTERED ADMINISTRATORS (RAS)
Non - Compliance and Sanctions
 Offence for RAs to fail to carry out core functions within time
limits specified
- within 8 months of scheme year end for annual reports
- within 1 month prior to date of issue for benefit statements
 RAs who outsource still liable
 Sanctions for failure to perform core functions may include:
- prosecution (not on-the-spot-fines)
- subjecting RA to conditions on renewal of its registration
- refusal to renew the registration
 RAs can rely on third party defence apart from outsource
arrangement
SOCIAL WELFARE AND PENSIONS ACT, 2008
REGISTERED ADMINISTRATORS (RAS)
Non-Compliance and Sanctions (cont)
 Sanction depends on degree of non-compliance and number of
schemes in respect of which offence has been committed
 RA can appeal Board’s decision to terminate or refuse to renew
registration to High Court
 Criminal offence to carry out core functions without registering
with the Board
 Trustees still retain current duties under Pensions Act to provide
Annual Reports and Benefit Statements
– where they fail to do so but can show they had taken
reasonable steps to secure compliance by RA, Board will not
pursue trustees
On-the-spot fines
• Introduced in Social Welfare Law Reform and
Pensions Act, 2007
• Came into force September 2007
• Alternative to going to court
• More efficient way of addressing compliance
issues
• Board gives offender 21 days to remedy the
offence and pay the appropriate fine (€2,000)
On-the-spot fines
On-the-spot fines apply to a range of lesser
offences under the Pensions Act, including:
• Failure to register a scheme with the Board
• Failure to provide scheme members with
appropriate information
• Failure to respond to requests for information
from the Pensions Board
• Employers not advising employees of pension
or PRSA deductions
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.
Changing world we live in
We are Living Longer
More Contract Work
More mobility in careers
Changing work patterns
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
Where will your income come from when
you retire?
The current state social welfare pension is €230.30 per week (or €
11,975.60 per year)
…….will this be enough to meet all your needs in retirement?
Almost 80% of the Pensions Board Consumer Research sample
said that the State old age pension would NOT meet their needs
in retirement
National Pensions Action Campaign
2008
The Pensions message
Simplify the message
 Affordability
 Portability
 More straight forward than you think
 Employers obligations
Pensions in the workplace
• A good pension scheme has been long recognised as a very
valuable asset for both the company and its employees.
• There is a stronger commitment from employees to participate in
pension schemes where the employer makes a contribution.
• A company benefits from having:
– a reputation and respect as a good employer.
– a workforce that feels valued and important
– increased loyalty and commitment from staff
– an enhanced staff recruitment, reward and retention
package
Employers’ Obligations/ Opportunity
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).
– Pensions Board encourages employers to regard pensions as part
of the recruit, reward & retain approach to staff
– Pensions Board also encourages all employees to ask the employer
about their pension rights
Financial Planning Education Initiatives
The Pensions Board is directly involved in the following
educational related initiatives:
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Joint ventures with FAS and Fáilte Ireland
(National State Training Authorities)
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National Recruitment Federation with over 100
private sector recruitment agency members
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Information stands at education events
Challenges – Pensions aren’t exciting!
Key barriers to pension take-up included:
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Heavy complicated pensions language
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Absence of pensions from mainstream consumer media
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Absence of pensions from general conversation
More information…..
The Board’s website for
Information – Checklists - Calculators
Contact us by phone or e-mail on
01 - 613 1900
e-mail: [email protected]
We all have a responsible role to play in…..
….actively promoting pensions take up !