6th October 2005

1
Pensions In Ireland

• 6th October 2005

2
Overview
Overview of Pension Coverage Overview of
Investment At Retirement Pensions
Issues Commissions

3
Overview of Pension Coverage
StateDefined benefit schemesDefined
contribution schemesAVCs Personal
PensionsPRSAs
4
Pension Coverage
State Contributory pension of 9000 per annum
5
Defined benefit schemes
Pension of 1/60th salary for each year of
service- 2/3rds of salary for 40 years Option
to convert pension to Tax free lump sum of up to
1.5 times salary . Spouses pension-typically
half members
6
Defined contribution schemes
Pension based on contributions typical 5
employer 5 employee Tax free lump sum of up to
1.5 times salary . Balance used to purchase
annuity with or without spouses pensions
7
AVCs
Additional Voluntary ContributionsEmployees
can increase pension and lump sumTax relief on
contributions on 15 to 30 of salary
8
Personal Pensions
Pension for the self employed. Tax relief on
contributions from 15 to 30 of earnings
depending on ageTax free lump sum of 25 of
fundBalance used to purchase annuity with or
without spouses pensions
9
PRSAs
Personal Retirement Savings AccountsCan be
used for employees or self employed or AVCsTax
free lump sum available
10
Pension Coverage
11
Overview of Investment
State Mostly Pay As You Go Government set up
National Pensions Reserve Fund currently 12.3bn

12
Overview of Investment
Defined benefit schemes Managed funds typically
70 equities But increasing elements of Bonds
13
Overview of Investment
Defined contribution schemes,AVCs, Personal
Pensions, PRSAs Managed Funds With
Profit Funds Alternative Investments
14
Overview of Investment
Managed Funds High risk to low Lifestyle
strategies- switching units to more conservative
basis

15
Overview of Investment
With Profit Funds Investment return smoothed so
no sudden falls in value. Dividends declared
each year 2002 equity falls cause problems


16
Overview of Investment
With Profit Funds Investment return smoothed so
no sudden falls in value. Dividends declared
each year 2002 equity falls cause problems


17
Overview of Investment
Alternative Investments Do It Yourself!!!! Stock
s Shares Property for rental income


18
At Retirement
Pension purchased by annuity Very
expensive Not well liked as asset dies with
death of holder.
19
At Retirement
Introducing Approved Retirement Funds Assets
invested in full range of choice Assets can
be passed on. Draw down is very flexible
20
At Retirement
Approved Retirement Funds-ARF When given a
choice most people choose An ARF rather than an
annuity
21
Pensions Issues
Special Savings Investment Accounts SSIAs
Mandatory Pensions Tax Relief
22
Pensions Issues
Special Savings Investment Accounts SSIAs
15bn SP 2.5bn
savings habit It all happens in
2006/2007
23
Pensions Issues
Mandatory Pensions 900,000 could be
covered May be seen as Tax
May lead to low average contribution
May be taken over by National
Pensions Reserve Fund
24
Pensions Issues
Tax Relief Increase relief for the lower
paid Reduce relief for higher paid
Could have serious detrimental effects for
all.
25
Commissions
Brokers Pick from a wide range of options AP
initial as a of first years premium
renewal as a percentage of subsequent
years SP as a of the Premium and/or a trail
paid as a of the fund
26
Commissions
Annual Premium Commission levels changing
from 50 initial and 3 renewal to 25
initial and 4 renewal or Flat 5 Single
Premium Typically 5 and/or trail of 0.5of
fund