Social Welfare and Pensions Act, 2011 - Information Note

The Social Welfare and Pensions Act, 2011 was signed into law on 29 June 2011. It makes certain amendments to the Pensions Act, 1990, as amended (“the Act”). It also makes certain changes in relation to the State pension. 

Pensions Act Amendments

  • Part 4 of the Social Welfare and Pensions Act, 2011 provides for amendments to the Act necessary to implement Article 17 of the IORPS Directive. In brief, Article 17 places an obligation on certain occupational pension schemes and Trust RACs to hold additional reserves where they underwrite death or disability benefits or guarantee a given investment performance or a given level of benefits. These schemes are known as regulatory own funds (ROF) arrangements and a new Part IVB has been inserted into the Act in relation to ROF schemes and Trust RACs.

The Pensions Board and the Department of Social Protection expect that in practice Part IVB will apply to few, if any, schemes or Trust RACs in Ireland because they are not established on the same basis as schemes of the sort contemplated by Article 17 of the IORPS Directive. The Board has published a separate information note on ROF schemes / Trust RACs and Part IVB which can be accessed under ‘Related Documents’.

  • Chapter 3 of Part 4 of the Social Welfare and Pensions Act, 2011 makes certain amendments to Part IVA of the Act which was introduced under the Social Welfare and Pensions Act, 2010. The amendments make provision for the certification by The Pensions Board of sovereign annuity policies or contracts of assurance as being suitable for pension purposes. The amendments clarify the responsibility of The Pensions Board in relation to certification of such contracts or policies. 

State Pension Amendments

The State pension does not come under the remit of The Pensions Board.  However, for general information, it should be noted that the Social Welfare and Pensions Act, 2011 makes certain amendments which impact on the existing State pension provisions. In particular, the State pension (transition) for new claimants will be discontinued with effect from 1 January 2014. This means that there will be a standard State pension age of 66 years for everyone from 1 January 2014. In addition, the Social Welfare and Pensions Act, 2011 provides for an increase in the age for qualification for the State pension from 66 years to 67 years from 2021 and a further increase to 68 years from 2028. 

 
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About the Pension’s Calculator

  • This pension’s calculator is designed to give a broad indication of the level of contributions required to give your desired pension at your retirement age. This calculator only provides a sample indication of the funding contributions for your pension and no reliance should be placed on it.
  • This calculator does not take into account any contributions an employer might make to your pension.
  • Do you know that contributions paid to a pension scheme will benefit from income tax relief at your highest rate of income tax? This calculator takes into account current income tax relief benefits.
  • For a full and accurate assessment of your personal finances and any tax relief you may be entitled to on your pension contributions always consult with a professional financial adviser

The next step is to talk to your employer, trade union, bank, insurance company, building society or financial advisor about starting your pension today.

Pension Calculator Notes:
  1. Assumptions used: Investment return will be 5% per year before retirement and 4% per year after retirement. Salary will increase at 3% per year. Pension will increase at 2% per year in retirement. The State Pension will increase in line with salary increases. Spouse's annuity assumes a 3 year age gap between the Main Life and Spouse. Your personal illustration above makes an approximate allowance for the recently introduced Pensions Levy (i.e. 0.6% of your Fund Value) until 2014 or your intended retirement year if earlier.
  2. Contribution amounts shown will increase each year as salary increases.
  3. The actual pension at retirement will depend on actual investment return and salary inflation up to retirement and on the cost of purchasing annuities at retirement.
  4. Tax relief calculations take account of age related limits on tax relief in any given year as prescribed by the Revenue. Your financial advisor will be able to help you to stay within your limits. The maximum tax relief as a % of earnings are as follows:
         Under 30: 15%
         30 to 39: 20%
         40 to 49: 25%
         50 to 54: 30%
         55 to 59: 35%
         60 and over: 40%
  5. Contributions or benefits may exceed limits prescribed by the Revenue. Your financial advisor will be able to help you to stay within your limits. Budget 2011, introduced a Standard Fund Threshold (SFT) of €2.3 million. Individuals with pension funds in excess of this value as at 7 December 2010 may apply for a Personal Fund Threshold(PFT). When the capital value of pension benefits drawn down by an individual exceed his or her SFT or PFT as appropriate, a tax charge of 41% is applied to the excess fund.
  6. In these net contribution calculations, PAYE & single persons tax reliefs and single persons tax bands are assumed. It is also assumed that no other tax reliefs apply.
  7. The annuity rate used to convert your pension fund at retirement age is a long term average annuity rate, which makes no allowance for the recent gender equalisation ruling. The annuity rate used in your personal illustration above will be shown when you run the calculator.
  8. This calculator takes account of the fact that the State Pension (Transition) will no longer be paid from 1 January 2014. This means that there will then be a standard State Pension age of 66 years for everyone. If you have qualified for the State Pension Transition before 1 January 2014 you remain entitled to it for the duration of your claim (1 year). State pension age will increase to 67 in 2021 and to 68 in 2028