Pension Challenges Presentation to Insurance Institute of Dublin

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Pension ChallengesPresentation to Insurance
Institute of Dublin

• 13th January 2005

Paul O'Faherty Peer Reviewed by Joyce
Brennan Dublin
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Topics for Today

• Pension Coverage
• DB Security/ DC Adequacy
• Welcome to Europe

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Coverage Quantum and Quality
203k Public Servants DB PAYG/NPRF
237k Private Sector DC Funded
32k PRSA DC Funded
37k Semi State DB Funded
220k Self Employed DC Funded
232k Private Sector DB Funded
State
Average Earnings
Public Serv
State Pension 30 AIE Compulsory PAYG/NPRF
Semi State
Private DB
Private DC
Self Employed
PRSA
Working Population 1.8m
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Coverage Some Personal Thoughts

• Verdict in on PRSAs
• Barriers are
• Awareness
• Complexity
• Affordability
• Is compulsion the answer?
• We already have compulsory pensions the state!
• White Paper due in 6 months

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DB Security

• Caught in pincer movement of
• Poor returns
• Falling interest rates
• 47 of schemes fail the funding standard (August
  2004)
• Shortfall is 5bn
• Standard itself under review annuity market is
  a big issue
• Employer reactions so far (August 2004)
• Increase employee contributions 3
• Reduce benefits 6
• Close to new entrants 22
• Wind up 5

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DC Adequacy
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DB Security/ DC Adequacy Challenges

• Lower returns in future
• Increasing life expectancy eg male age 65
• In 1985 Age 78
• Now Age 81
• 2025 Age 84
• Pressure for early retirement
• Conflicting short and long term pressures
• The reality is

Pensions are expensive and are going to cost us
all more
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Welcome to Europe
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Why Now?

• Desire among multinationals for
• Better governance and risk control
• Employee benefit harmonisation
• Employee service consistency
• Cross border mobility
• Economies of scale
• and solutions are available
• Asset pooling CCF is Irelands preferred
  product
• Pan European Pensions Directive 2005 the end a
  15 year journey
• or just a beginning.

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The Directive Key Points

• Allows for the establishment of a cross border
  pan European pension fund IORPs
• Lays down minimum standards for operation and
  supervision
• Specifies home country supervision and
  administration
• Covers
• Investment principles
• Fully funded for DB
• Tax still a major issue but being addressed
• Implemented by September 2005

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Services Needed
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Irelands Capacity
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The European Market
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Irelands Opportunity
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Why Ireland?

• Established and relatively simple regulatory
  regime
• IFSC reputation
• Familiarity of MNCs with doing business here
• Established pool of service providers
• Structural flexibility

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Topics for Today

• Pension Coverage
• Pension Security/Adequacy
• Welcome to Europe

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Questions