Tiarnan O Mahoney, Pensions Board Chairperson

The Pensions Board has today called on SSIA holders to consider investing in their pensions when their accounts mature by April 2007. The Board is highlighting the tax incentives in contributing to a pension. The CSO Quarterly National Household Survey 2005 highlighted that in the fourth quarter of 2005 SSIA account holders indicated that over 46% of their fund will be committed to Savings, Pensions and Investments.

A large majority of Irish-owned firms do not provide their workforce with an occupational pension while the funding of the equivalent of a public sector pension for a 40 year period, would amount to 28% of annual earnings.

When public sector salaries are increased, retirees receive the same increase.

Speaking today, Mary Hutch, Head of Information and Training said: “As SSIA accounts continue to mature, now is the time to start planning for the future. We would encourage SSIA account holders to roll over all or part of their savings into a pension and keep up the saving habit. A very encouraging outcome of the SSIA scheme is that a high proportion of the savers are young first time savers who now have an opportunity to start a pension early as it is a tax efficient way of saving for future retirement.

The Board has developed a series of Calculators which are available on the website at www.pensionsboard.ie to help guide and inform people with their savings options.  The continuation of the saving trend for these groups post SSIA could provide a significant pensions boost among one of the groups where pensions coverage traditionally tends to be low.” 

The Minister for Finance Brian Cowen through the Finance Act 2006 included incentives for lower income SSIA holders.  The Act provides that the Exchequer will pay a bonus directly into the pension account of €1 for every €3 transferred, up to a maximum bonus of €2,500. In addition, the exit tax on cashing one’s SSIA on maturity will be refunded in proportion to the amount of SSIA transferred into the pension account. The bonus and exit tax refund will be an alternative to normal pensions tax relief at one’s marginal tax rate. This incentive is restricted to SSIA holders with an income limit of €50,000.

“In essence, a pension is a more profitable scheme than an SSIA, but it is simply conducted over a longer term. The Pensions Board is confident that SSIA holders will realise the importance of long term financial planning and take the necessary action required to continue a positive habit of saving for their futures,” said Mary Hutch.