National Pensions Policy Initiative

1

2
PRSAs

• National Pensions Policy Initiative
• Occupational Personal Pensions Coverage

• How ?

3
PRSAs

• Personal Retirement Savings Accounts
• Regulated by Pensions Board
• Very simple Portable Pensions
• Charges are capped
• Tax PRSI relief
• Every employee must be given access

4
PRSA Charges
PRSA
Standard
Non-Standard

• No cap on charges
• Wider selection
• of investment funds
• But contracts have
• to be approved by
• Pensions Board

Max of 5 of premium and Max 1 of the Fund every
year
5
PRSA Tax relief
Personal Contributions

• Marginal Rate Tax Relief

• Personal PRSI / Health levy relief
• - 4 PRSI relief
• - 2 Health levy relief

6
PRSA Tax relief
pensions
Cost to the Gov
YOU GET FULL TAX RELIEF
480
1,000 invested
Cost to you
520
You get full tax relief of 42 and PRSI relief of
6
Tax relief I is limited to contributions which
are based on a percentage of your salary and
dependent on age you age. These rates are
available from your financial adviser. The tax
rate quoted is the top rate for the year 2003.
You must be eligible to take out a pension in
order to claim reflief. Relief is obtained by
submitting your tax certificate to the Revenue
Commissioners.
7
PRSA Tax relief
pensions
Cost to the Gov
Cost to the Gov
GROWS TAX-FREE
YOU GET FULL TAX RELIEF
420
480
1,000 invested
1,000 invested
Cost to you
Cost to you
580
520
You get full tax relief of 42 and PRSI relief of
6
AT RETIREMENT YOU HAVE A LARGE LUMP SUM
42
Tax relief is limited to contributions which are
based on a percentage of your salary dependent on
your age. These rates are outlined on slide 2.
The tax rate quoted is the top rate for the year
2003. You must be eligible to take out a pension
in order to claim relief. Relief is obtained by
submitting your tax certificate to the Revenue
Commissioners.
8
PRSA Tax relief
pensions
Cost to the Gov
GROWS TAX-FREE
YOU GET FULL TAX RELIEF
480
1,000 invested
Cost to you
520
You get full tax relief of 42 and PRSI relief of
6
25 can be taken TAX-FREE
AT RETIREMENT YOU HAVE A LARGE LUMP SUM
The other 75 is TAXABLE
Tax relief is limited to contributions which are
based on a percentage of your salary dependent on
your age. These rates are outlined on slide 2.
The tax rate quoted is the top rate for the year
2003. You must be eligible to take out a pension
in order to claim relief. Relief is obtained by
submitting your tax certificate to the Revenue
Commissioners.
9
PRSA Tax relief
pensions
Cost to the Gov
Cost to the Gov
GROWS TAX-FREE
YOU GET FULL TAX RELIEF
420
480
1,000 invested
1,000 invested
Cost to you
Cost to you
580
520
You get full tax relief of 42 and PRSI relief of
6
25 can be taken TAX-FREE
AT RETIREMENT YOU HAVE A LARGE LUMP SUM
Take an income
The other 75 is TAXABLE
OR
Take the cash
Unless you have a guaranteed income of 12,700,
63,500 of your fund must be invested into an
approved minimum retirement fund
Tax relief is limited to contributions which are
based on a percentage of your salary dependent on
your age. These rates are outlined on slide 2.
The tax rate quoted is the top rate for the year
2003. You must be eligible to take out a pension
in order to claim relief. Relief is obtained by
submitting your tax certificate to the Revenue
Commissioners.
10
PRSA Employer Obligations

• You have NO obligations if you have
• a company pension (with an AVC facility) covering
  all employees, and
• the only condition is a 6 month waiting period

• In all other circumstances you have obligations
  to be met by the 15th September 2003

11
Employer Obligations by 15th September

• You must designate at least one PRSA provider

You must notify staff of their right to
contribute to a PRSA
You must allow an adviser access to your staff
You must allow staff take out a PRSA on company
time
12
Employer Obligations by 15th September

• You must facilitate a payroll deduction facility

You must pass on deducted contributions to
provider within 21 days
You must notify employee (in writing) PRSA
provider how much you deducted every month
13
Employer Obligations

• You do not have to
• take on any responsibility for advice, or
• contribute anything to the PRSA,
• but .

14
Free staff perk ?

• if you do decide to contribute.
• It can cost you nothing !!!
• You get corporation tax relief on what you
  contribute, and
• Employer PRSI relief on what your employee
  contributes.

15
Employee Contribution
Employer Contribution
200 Per month
200 Per month
200 Per month
25 Per month
25 Per month
25 Per month
225
Corporation Tax Relief _at_ 12.5
3.13 pm
Employer PRSI Relief _at_ 10.75
21.50 pm
Net Employer Contribution
0.37 pm
16
Actions Needed

• Decide if you pass on tax savings to staff
• Designate a provider
• Inform Staff

17
Are PRSAs appropriate for Directors ?

• Usually not
• Alternative is Directors Company Pension
• Much higher contribution limits
• More options at retirement

Maximum at age
Company
PRSA
35 45 55
20 25 30
76 130 426

• Tax planning vehicle
• Facilitates moving large amounts of cash out of
• company very tax efficiently

Assuming were talking age 60
18
Who do you designate ?

• There are 9 providers in the market
• We make our recommendation based on 4 criteria

Financial strength of provider
Ability to administer scheme with least hassle to
you
Standard PRSA charging structure
Investment Approach
19
Financial Strength

• Canada Life SP AA
• Irish Life SP A
• Bank of Ireland/New Ireland SP A
• AIB SP A
• Hibernian (CGNU) SP A
• Eagle Star (Zurich Group) SP A-
• Friends First (Eureko Group) SP A-
• EBS Moodys Aa3

20
Ability to administer - Quality of service
IBA Service Awards Overall 2002 ranking

• Irish Life 1st
• Bank of Ireland/New Ireland 2nd
• Eagle Star 3rd
• Hibernian 5th
• Friends First 6th
• Canada Life 7th
• AIB not in survey
• EBS not in survey

Irish Brokers Association service award
personal experience
21
Standard PRSA charging structure

• Premium Fund
• Irish Life 5 1 reducing
• Friends First 5 1 reducing
• Bank of Ireland/New Ireland 5 1
• AIB 5 1
• EBS 5 1
• Hibernian 5 1
• Canada Life 5 1
• Eagle Star 5 1

up to 1,000 pm
22
Investment approach

• Employer has no responsibility for advice, but
  will inevitably have perceived association with
  chosen provider
• Two investment styles
• Active Management
• Index Management
• Employees can be offered a number of funds with
  different risks or a limited selection

23
Investment approach

• Active Management involves the risk of picking an
  under-performing fund manager
• Impossible to pick out who will be the best
  manager in the future
• Indexed Managed Funds adopt the average asset mix
  of all investment managers
• Indexed Managed Funds eliminate the risk of
  designating an under-performing fund manager
• We recommend designation of a provider who offers
  an indexed managed fund

24
Investment approach

• 3 providers offer an indexed managed fund
• Irish Life
• who also offer cash gilt funds
• New Ireland
• who also offer 2 actively managed funds and a
  cash fund
• Canada Life
• who offer 2 indexed and 2 actively managed funds
• as well as cash gilt funds

25
Next Steps

• Confirm Designation
• Complete simple form
• Inform Staff Arrange Employee Presentation
• To fulfil obligation
• John Ellis Insurance will also provide a free
  full financial review for any employee who wants
  one
• Designation Certificate
• Will be given by designated provider to confirm
  obligations met

26
(No Transcript)