Independent Trustee Company Blog

Showing posts with label self-administered; ITC. Show all posts
Showing posts with label self-administered; ITC. Show all posts

Wednesday, April 10, 2013

Fianna Fail Launches Pension Strategy Paper


The Fianna Fail pension strategy, launched today by Willie O’Dea, deals with several issues close to our heart:

1.       The funding requirements for DB schemes

2.       The priority order for DB schemes on wind up

3.       Early Access to Pensions and

4.       The issue of Pension Charges

As chair of the Pensions Committee of the IBA I have actively involved in communicating with politicians of all shades on the issues facing pensions. The paper launched by Willie O’Dea is testament to the fact that patient and consistent dialogue does have an impact.

The funding levels DB schemes have to met is set at artificially high levels due to:

1.       the historically low level of bond yields and

2.       the additional reserve requirement imposed by the current government

The Paper proposes that this be addressed by easing the funding requirements and allowing greater flexibility as to when and if annuities are purchased.

In relation to the priority order the Paper suggests that, once a certain level of pension has been guaranteed in priority to pensioners the balance should rank equally with other members of the scheme. This would address the big gap in benefit that can exist between members either side of retirement age.

The current early access regime is too restrictive (as it only applies to AVCS) and mean spirited (as it imposes an additional 41% tax on those in difficult financial circumstances). The solution proposed is to replace it with an option to take some or all of your tax free lump sum at any stage in your life. There is no loss of tax to government and the greater flexibility enhances the attractiveness of pensions and gives relief where it is due.

On pension charges the Paper proposes the development of a Total Expense Ratio so that fund manager costs can be more easily identified. Also greater transparency on other costs is advocated.
 
To view the full paper click here.

Written by Aidan McLoughlin
Independent Trustee Company
Managing Director