Alan Hardie - Society of Actuaries in Ireland
Alan Hardie - Society of Actuaries in Ireland
Alan Hardie - Society of Actuaries in Ireland
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
The <strong>Society</strong> <strong>of</strong> <strong>Actuaries</strong> <strong>in</strong> <strong>Ireland</strong>Pensions by DesignThe See-Saw <strong>of</strong> RiskDBHybridsEmployer HighEmployee LowDCEmployer LowEmployee HighApril 20072
The <strong>Society</strong> <strong>of</strong> <strong>Actuaries</strong> <strong>in</strong> <strong>Ireland</strong>Pensions by DesignThe Ma<strong>in</strong> Risk FactorsReal Investment returnpre-retirementReal Investment returnat / post-retirementImprov<strong>in</strong>g MortalitySecurity <strong>of</strong> BenefitsDBEmployerEmployerEmployerEmployeeDCEmployeeEmployeeEmployeeN/AApril 20073
The <strong>Society</strong> <strong>of</strong> <strong>Actuaries</strong> <strong>in</strong> <strong>Ireland</strong>Pensions by DesignThe Emergence <strong>of</strong> Hybrid Designs• Recent phenomenon <strong>in</strong> <strong>Ireland</strong>• Various Designs•By Benefit•By Service•By Salary• “Half-way house” between DB and DC• Risk Shar<strong>in</strong>gApril 20074
The <strong>Society</strong> <strong>of</strong> <strong>Actuaries</strong> <strong>in</strong> <strong>Ireland</strong>Pensions by DesignCareer-Average Revalued Earn<strong>in</strong>gs• Accrual rate• Choice <strong>of</strong> <strong>in</strong>dex (CPI?)• Suitable for mid-career earn<strong>in</strong>gs peak• “Souped-down” DBApril 20076
The <strong>Society</strong> <strong>of</strong> <strong>Actuaries</strong> <strong>in</strong> <strong>Ireland</strong>Pensions by DesignRisk-Shar<strong>in</strong>g <strong>in</strong> DC Schemes• Target benefits• Initial•Reviewable• Match<strong>in</strong>g Contributions• Internal PurchaseApril 20077
The <strong>Society</strong> <strong>of</strong> <strong>Actuaries</strong> <strong>in</strong> <strong>Ireland</strong>Pensions by DesignHybrid Design by Benefit• Traditional – pension plus tax-free cash• Public & Civil Servants• EBS new design• Cash Balance – retirement benefit is cash fund• BarclaysApril 20078
The <strong>Society</strong> <strong>of</strong> <strong>Actuaries</strong> <strong>in</strong> <strong>Ireland</strong>Pensions by DesignCash Balance Plans• Benefit is cash sum guaranteed at retirement• Increased by an <strong>in</strong>dex (RPI) plus some<strong>in</strong>vestment return• Very like with-pr<strong>of</strong>its• Internal purchase option• Possible associated DC match<strong>in</strong>g planApril 20079
The <strong>Society</strong> <strong>of</strong> <strong>Actuaries</strong> <strong>in</strong> <strong>Ireland</strong>Pensions by DesignProCash Balance Plans• Pre-retirement risk reduced for employee• Internal purchase likely better value• Longevity risk sharedCon• “Cliff-edge” <strong>of</strong> annuity purchase• Cost <strong>of</strong> guarantee reduces overall returnApril 200710
The <strong>Society</strong> <strong>of</strong> <strong>Actuaries</strong> <strong>in</strong> <strong>Ireland</strong>Pensions by DesignHybrid Design by Service• Nursery plans• DC for <strong>in</strong>itial period, DB thereafter• PRSA model – Irish Life & PermanentApril 200711
Nursery PlansThe <strong>Society</strong> <strong>of</strong> <strong>Actuaries</strong> <strong>in</strong> <strong>Ireland</strong>Pensions by DesignPro• All risks much reduced for long-servers• DC element can be looked on TFC source• Flexibility <strong>in</strong> retirement optionsCon• Overcompensates early leavers• More expensive than DBApril 200712
The <strong>Society</strong> <strong>of</strong> <strong>Actuaries</strong> <strong>in</strong> <strong>Ireland</strong>Pensions by DesignHybrid Design by Salary• Higher salary – higher risk• DB for <strong>in</strong>itial level <strong>of</strong> salary• Integrated?• DC on top• AXA / Alliance / EBSApril 200713
The <strong>Society</strong> <strong>of</strong> <strong>Actuaries</strong> <strong>in</strong> <strong>Ireland</strong>Pensions by DesignSalary Hybrid PlansPro• All risks removed for lower-paid• Initial tranche <strong>of</strong> DC is TFC source• Flexibility <strong>in</strong> retirement options• Cheaper than full DBCon• What is correct DC contribution• Indexation <strong>of</strong> ceil<strong>in</strong>g• Still risks for higher-paidApril 200714
The <strong>Society</strong> <strong>of</strong> <strong>Actuaries</strong> <strong>in</strong> <strong>Ireland</strong>Pensions by DesignOther Considerations• Account<strong>in</strong>g – IAS19, FRS17 etc• Perceptions• Employer position<strong>in</strong>g – car<strong>in</strong>g?• Staff retention / attraction• CommunicationsApril 200715
Change language