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27th May 2010
Mary Hanson
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.
Key Components:-
Rise in Retirement Age
Auto Enrolment
Tax Relief at 33%
Employer Contribution equivalent to State
Contribution.
Social Welfare Pensions
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Mandatory social welfare pension coverage will continue.
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The Government will seek to maintain the rate at 35% of average weekly
earnings.
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The system will be simplified with a move to a total contributions approach.
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Homemakers‟ disregard will be replaced with credits for new pensioners
from 2012.
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State pension age will increase to 66 in 2014, 67 in 2021 and 68 in
2028.
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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
responsibility.
Auto-enrolment
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There will be matching employer contributions and matching State
contributions.
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The State contribution will equal 33% tax relief
(delivery mechanism to be decided).
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There will be an opt-out mechanism for employees
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Access to Approved Retirement Funds will be provided.
Current Occupational & Voluntary
Provision
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There will be a matching State contribution equal to 33% tax relief (delivery mechanism to be
decided).
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Access to Approved Retirement Funds will be provided for defined contribution scheme
members.
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There will be stronger regulation.
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A new DB model is proposed which schemes may wish to adopt in future.
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The funding standard will be kept under review.
Public Service Pensions
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A single new pension scheme will be introduced for all new
entrants, with effect from 2010.
Tracing Service Dormant Benefits
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A tracing service will be put in place to facilitate the tracing of pension rights by former
employees and scheme trustees.
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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
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