Bank of Ireland's Group Chief Executive proposes "Bonus PRSA" product to boost pensions coverage

- Proposal builds on SSIA success - simple, incentivised, access to cash and deadline driven

Speaking to the Irish Association of Pension Funds in Cork today, Bank of Ireland Group Chief Executive, Brian Goggin, highlighted the current problem on pensions coverage and outlined the Bank's proposal to Government to address the issue.

"A pension is a product whose inherent virtues are self-evident; a product that can be classified as an absolute necessity for every wage-earner in the State and one that comes with unrivalled tax incentives - and yet, the public ? or at least an uncomfortably large portion of it - remains to be persuaded, not just of PRSAs, but of pensions in general", said Brian Goggin, Group Chief Executive, Bank of Ireland addressing the Irish Association of Pension Funds annual lunch in Cork today (Thursday 27 October 2005).

"A sense of urgency now surrounds the entire issue of pensions. Pension coverage in Ireland is currently middle class, middle-aged and male with penetration remaining at just over 50% - an entirely unacceptable statistic. In fairness to Government, it has for some time recognised the dangers of the status quo and, as a response, introduced the PRSA scheme. Regrettably, more than two years following the introduction of that scheme, we have to recognise that this initiative has not achieved the progress hoped for".

"Despite the best efforts of the Pensions Board, which has done significant work in raising awareness of the need for individuals to take responsibility for their own income in retirement, PRSAs have failed to capture the imagination of the public. It was hoped that this product would increase our national pensions coverage from 50% to 70% by 2007. However, two years later, our current pensions coverage remains at a low of just over 52%".

"For us in the industry, there is a responsibility - to say nothing of a business imperative - to communicate the compelling case for pensions in an effective and transparent manner. For government and regulators, there is a need to ensure that the environment is created that facilitates the same objective we all have; a pensions market where the customer experiences choice and value and in which they can have absolute confidence".

"It is not as if the Irish consumer is incapable of responding to imaginative initiatives in financial matters. Contrast the fortunes of the PRSA with the SSIA scheme. Here we have a savings scheme that can truly be said to have captured the public's imagination - 1.1 million accounts opened within 12 months and, now, nearly five years later, national debate on what we should or should not do with the proceeds. The arrival of the SSIA scheme has managed to bring the discipline of saving and financial planning to the forefront of the national consciousness and, in the process, has brought the business of pensions out into the sunlight".

"We at Bank of Ireland recently proposed a new pensions initiative - the Bonus PRSA. This product proposal aims to combine the success of the SSIA with the lessons learned from the introduction of PRSAs. The benefits of the proposed product are that it is easy to understand, offers a clear incentive for long-term saving, provides for periodic access to cash and is deadline driven. The Bonus PRSA proposal simply reverses the way tax relief, already available on pension contributions, is applied by converting the relief into a tax bonus. This makes the incentive for long-term saving easier to understand for consumers, with no additional cost to government. The deadline element of the proposal would give consumers the motivation to start their Bonus PRSA once their SSIA matures so that they can continue their savings habit. In our proposal, customers who start a Bonus PRSA before 1 May 2008 would benefit from an extra tax bonus for the first year of their policy".

"What is clear to us at Bank of Ireland, is that some degree of imagination is required in order to translate the laudable objectives we all have around the pensions issue - industry, government and regulator - into actual business. The consequence of failure is severe. I know that my alarm is shared by government and the Pensions Board and this can be easily gauged by the recent proposal that some degree of pensions provision becomes mandatory".

"This, I believe would be a retrograde step. Setting aside the numerous reservations already expressed, I believe the introduction of a mandatory pension provision would be an effective admission that the three principle parties involved in this area - government industry and regulator - are unable to persuade the public of the validity of the case for pensions".

"If we cannot persuade the Irish public on the critical necessity of pension products then we will have failed in a key battleground. It is a question of balancing the legitimate interests of all parties fairly. It is about protecting and informing the consumer, while understanding the commercial realities of business. I am confident in our continuing ability as financial professionals to supply the public with attractive, innovative and competitive products. At Bank of Ireland, we take the view that in this increasingly affluent market, with customers of growing sophistication, curiosity and genuinely unfulfilled needs, there is an exceptional opportunity for those businesses that can truly distinguish themselves by the quality of their advice to customers".

"At this crucial juncture in the pensions debate, I know that you will seek to influence matters in the best long-term interests of all - industry and customers alike", concluded Brian Goggin.

Ends

A copy of Brian Goggin's full script is available on PDF,click here to read.

Contact:

Anne Mathews
Media Relations Manager
Group Corporate Communications
Ph.00 353 1 604 3836 or 00 353 87 246 0358