The qualifying age for State Pension payments will rise as outlined below:

Qualifying Age for State	Pension
Any date before 31 December 1948	65 years
1 January 1949 – 31 December 1954	66 years
1 January 1955 – 31 December 1960	67 years
1 January 1961 – present	68 years

• A system of social insurance credits towards the State Pension has been proposed to compensate people who take time out of the workplace for caring duties (i.e. caring for a child or a disabled adult).
• Arrangements are to be put in place to allow people to postpone receipt of the State Pension should they wish to do so. Individuals may choose to postpone benefi ts in order to receive an increased benefi t rate at a later date, or to make up for previous contribution shortfalls.
• At present, a person’s entitlement to a State Pension is determined by their average contributions over their working life, subject to certain minimum contribution levels. It is intended that a new system will be implemented in 2020 whereby an entitlement to 1/30th of a State Pension will accrue for each year of PRSI contributions, up to a maximum of 30/30ths.
• From 2014, there are plans to introduce an ‘auto-enrolment’ pension scheme for all employees over the age of 22 earning above a certain income. It will be mandatory for all employers to implement the system through payroll. Employees may opt out of the scheme if they wish, but they will be automatically re-enrolled every two years.
• There will be a once-off bonus payment for people who remain in the scheme for more than fi ve years continuously.
• Employees will contribute 4% of their gross wages within a band of earnings with Government and the employer providing matching contributions of 2% each, making a total contribution equivalent of 8%.
• Contributions to the scheme will qualify for relief from PRSI and the Health Levy.
• It is intended that a fl oor and ceiling for qualifying income levels will be set at a later date.

It should be noted that the Framework document states: ‘It is intended that the auto-enrolment scheme will be introduced in 2014 but only if it would be prudent given the economic conditions prevailing at that time.’

Relief fo Pension Contributions

• The proposed State Contribution would replace the existing tax relief system for occupational and personal pension schemes.
• Pension contributions are currently treated as a deduction from taxable income and give tax relief at the person ’s highest rate of tax, currently 20% or 41%. This has been seen as favouring high earners.
• The proposed State Contribution would be equal to 33% relief (2% State Contribution for every 6% contributed in total by the employer and employee).
• In order to simplify the current system and to provide parity between the various forms of pension product, it is proposed that from 2011 the following benefi t options will be available, on retirement, to holders of defi ned-contribution occupational pension schemes:Existing Personal Pensions and occupational Pension Schemes:
  i)   A tax-free lump sum of up to €200,000, subject to existing rules of calculation.
  ii) Any balance remaining in the fund may be invested in an Approved Retirement Fund (ARF), subject to certain minimum income levels, or used to purchase an annuity.
• The tax treatment of lump sums in excess of €200,000 drawn down on retirement is to be specifi ed at a later date.

Full framework document available at:
http://www.welfare.ie/EN/Policy/PolicyPublications/Pensions/Documents/National%20Pensions%20Framework.pdf

Full Newsletter: SHINE A LIGHT ON YOUR BUSINESS May 2010

Download and read the full newsletter in PDF format here.

Tags: investment advice, Ireland investment advise, pension planning, pensions Ireland, retirement investment, Wealth protection