27th May 2010
Government Publish Paper on New National Pensions Framework
For every pensioner we have now there are around 6 people at work to support giving a ratio of 1:6;
it is estimated that by 2060 that figure will be less than 2, giving a ratio
of 1:<2. The pension time bomb.
In order to try address this inevitable scenario and the financial strain this will put on the
Country, the Government launched in March 2010 a new proposed National Pensions Framework.
Rise in Retirement Age
Tax Relief at 33%
Employer Contribution equivalent to State
Social Welfare Pensions
Mandatory social welfare pension coverage will continue.
The Government will seek to maintain the rate at 35% of average weekly
The system will be simplified with a move to a total contributions approach.
Homemakers‟ disregard will be replaced with credits for new pensioners
State pension age will increase to 66 in 2014, 67 in 2021 and 68 in
Arrangements will be put in place to allow people to postpone receipt of the State Pensionand
to make up contribution shortfalls. This will increase coverage and employer
There will be matching employer contributions and matching State
The State contribution will equal 33% tax relief
(delivery mechanism to be decided).
There will be an opt-out mechanism for employees
Access to Approved Retirement Funds will be provided.
Current Occupational & Voluntary
There will be a matching State contribution equal to 33% tax relief (delivery mechanism to be
Access to Approved Retirement Funds will be provided for defined contribution scheme
There will be stronger regulation.
A new DB model is proposed which schemes may wish to adopt in future.
The funding standard will be kept under review.
Public Service Pensions
A single new pension scheme will be introduced for all new
entrants, with effect from 2010.
Tracing Service Dormant Benefits
A tracing service will be put in place to facilitate the tracing of pension rights by former
employees and scheme trustees.
Consideration will be given to the establishment of a State managed fund into which untraceable
accounts would be deposited.
An Auto-enrolment System
Employees will be automatically enrolled into a new pension scheme unless
they are a member of their employer’s scheme and that scheme provides higher contribution levels or
is a DB scheme.
Contributions to the new scheme will be made within a band of earnings, with earnings below and
above certain thresholds exempt. Employees will be required to make a
fixed percentage contribution. In addition, in line with the Government commitment, a State
contribution equal to 33 per cent tax relief will be provided in respect of pension contributions
made by the employee (within a band of earnings). Employers will be obliged to
provide a contribution equivalent to the State contribution. For example, a contribution of €4 to
the scheme would comprise an employee contribution of €2, a State contribution equivalent to €1and
an employer contribution of €1.
If you would like to read more click here, or to read the full text
click on link below: http://www.pensionsgreenpaper.ie/downloads/NationalPensionsFramework.pdf