Submission 22
November 2007
Public Sector Pensions:
Public Sector pensions need to change from DB to DC in order to have a sustainable pension arrangement. This needs to be applicable for all new public sector appointments. For existing public sector pension liabilities government needs to consider available funds for public sectors funds and project cash inflow and outflow for the same over next 50 years. They need to provide budgetary allocation for any gaps during each year's budget to make sure that these gaps are addressed.
Private Sector Pension:
This pension should be a mix of Universal Pension and Discretionary Pension.
Universal Pension:
Universal Pension is a minimum mandatory pension for anyone over the retirement age. This pension funding should be part of current PRSI arrangement as well as mandatory employer and employee contribution which should be introduced in the future.
This pension should allow anyone above retirement age to provide for their day to day living expenses.
Discretionary Pension:
This is an additional facility given to self employed and employees to save for their pension. This pension should have following features:
Tax Benefits
This pension contribution should get 50% tax rebate irrespective of level of tax rate applicable. It should be allowed to grow tax free during accumulation period and should be taxed only when received by employee during their retirement year. Govt should consider following EEE model (exempt, exempt, exempt) for this pension arrangement in place of current EET model (exempt, exempt, taxed).
Lock in Period
This pension fund is having a lock in period of 10 years initially. After 10 years a subscriber should be allowed to use this fund for specific purposes e.g. repaying mortgage which are an additional avenue for them to plan for their retirement.
Investments/Choice/Admistration
This fund should be completely portable from one pension fund service provider to another.
It should be managed like a central account by govt agency with subscriber having choice to select his investment funds and switch between investments funds at specific intervals say once or twice every year.
This pension fund should not be any way tied to employer and should remain in force irrespective of change in employment.
Immigrants:
Any non Irish citizen working in Ireland should be allowed to withdraw his pension fund at end of his stay in Ireland. If the same person comes back to work in Ireland then he will need to re transfer his pension funds back into Ireland to ensure his pension liabilities are met by the state.
In case withdrawal is not permitted immediately on his departure, he should be allowed to withdraw at end of specified period e.g. 2 years from his departure from the state.
Pension Age:
Employee should be allowed to retire at current pension age of 65.
However he or she can continue to work in different places after that age without losing his pension benefits.
Annuities:
Annuities should be allowed, however employee or beneficiary should have complete control over his funds post retirement. It is best to assume that a person knows best options available to him to get good returns on his investment.
Regulation:
- Current pension regulation is inadequate and it favours pension service providers as compared to person funding his own pension.
- Fund management charges are still higher compared to many other investment funds
- There are limited fund choices available
- Pension fund providers do not find it lucrative enough to educate about pension and get business due to various reasons.
- All pension funds should be regulated using same regulations. We have some model regulators like SEBI in India which regulates Mutual Fund and IRDA which regulates Insurance schemes including pension schemes. They have a defined cap on annual expenses, entry and exit loads and these charges needs to be defined upfront. There is a scope to increase transparency in this area to a large extent.
