Friday, June 27, 2008

Pensions Green Paper Submission

The following are some issues where I feel that some improvements can be made to the current Pension/PRSA regime, in the interest of fairness and equality.


Under existing legislation governing PRSAs, Employers have to offer their employees the facility to put in place, at least one Standard PRSA in situations where:

 There is no pension scheme currently in place
 Some employees are excluded from the existing pension scheme
 The waiting period for membership of the existing scheme is more than 6 months
 The current pension scheme rules do not allow employees to make AVCs

There is no obligation on the employer to contribute to the PRSA.

However, if an employee decides to contribute to a PRSA, and their contributions are deducted at source through payroll, the employer saves 10.75% of that contribution through a PRSI saving.

It is my opinion that this saving should be automatically made by the employer to the employees PRSA.

I am not convinced that a SSIA type contribution to a Pension/PRSA will encourage more people to save for their retirement. The only way that this would be popular is where the consumer would have unconditional access to some of the money at an earlier date than normal retirement age.

This defeats the purpose of retirement planning and I feel that personal savings and retirement funding should be kept separate. The population is confused enough as it is with all the different types of products on offer, why make it worse.

I do believe that the tax-relief system that is currently employed should be maintained but that the relief should not be dependent on highest marginal rate. It is my opinion that all pension contributors should get a standard relief in the region of 35%.

Those that are not in the tax-net could either qualify for a rebate of the relief or be offered a greater percentage of their fund as tax-free cash at retirement age.

All defined contribution pension schemes should have a facility, whereby the fund should be made available, for legitimate medical expenses, at the behest of the pension holder, before normal retirement age.

Pension Product Providers should not be allowed to offer reduced allocation rates to those that are making minimum contributions to pensions. This is more prevalent in the Personal Pension market and involves giving those that make larger contributions more favourable product terms.

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