Actuarial Review of the Social Insurance Fund 2005 - Department of ...

Graph 6.3(a): PAYG Contribution Rates as % of Current Rates250%% Current PRSI Rates225%200%175%150%125%100%75%2006 2016 2026 2036 2046 2056YearActuarial Review of the Social Insurance Fundhave shown these rates separately over anumber of time horizons, as follows:n on an annual or Pay-As-You-Go basis;n over the five year period commencing in2008;n over successive ten year periodscommencing in 2008 9 ;n over successive 20 year periodscommencing in 2008 9 , andn over the full review period.Where contributions relate to a periodother than a single year, we have assumedthat the excess of contributions overbenefits in the early years would beinvested at a real yield of 2% per annumand ultimately used to defray the risingcost of benefits in later years.We have ignored the current accumulatedsurplus in this exercise because, as alreadydiscussed, it is not material in the contextof the magnitude of the Fund’s benefit andcontribution flows.6.3.2 Graph 6.3 (a) above confirms theincreasing contribution requirement overtime to break even. At the current time,contributions exceed benefit outgo byapproximately 7% and net cashflow isprojected to remain positive until 2008(2010 if investment income is included).The equalised contribution rates then risesteeply until around 2051 and plateau fromthere to the end of the review period.9. Note: the last period covers the remaining period to 2061.The projections suggest that, by 2061,contribution income would need to beincreased by 138% to meet benefit outgo.6.3.3 We set out in Table 6.3 (b) overleaf breakevencontribution rates separately oversuccessive 10 and 20 year periods and alsoover the whole projection period. We haveshown the outcome separately on the basisof:n no Exchequer subvention;n an annual Exchequer subvention of 25%of the benefits paid, andn an annual Exchequer subvention of 33%of the benefits paid.6.3.4 The table demonstrates that, whilecontributions at the current levels may bealmost adequate in the short-term, theyare clearly inadequate in the long-term. Inthe period from 2008 – 2017, an increaseof 5% in contribution rates is projected tobe adequate to meet benefit outgo but,thereafter, more significant step changesin contributions would be required - thecorresponding increase for the period 2048– 2061 is 138%. Over the entire projectionperiod, an increase of 74% in contributionrates would be required to meet benefitoutgo.41