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  #291  
Old 06-13-2018, 06:13 AM
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JAPAN
ASSET MANAGEMENT

https://www.bloomberg.com/view/artic...-what-you-kill

Quote:
$1.5 Trillion Says: Eat What You Kill
One pension plan sends a shock wave round the fund management industry.


Spoiler:
With 160 trillion yen ($1.5 trillion) to invest, Japan's Government Pension Investment Fund has an awful lot of clout. Its latest innovation is to oblige many of the outside firms that manage its money to eat what they kill rather than enjoy a free lunch from simply gathering assets. And where the world's biggest pension fund leads, the rest of the money-management industry looks bound to follow.

Less than three months after serving notice of a forthcoming change to how it remunerates its external partners, the fund this week revealed its new performance-based payment structure.

The pension fund says it doesn't need active managers to fulfill its obligations. “GPIF is basically able to meet its investment targets for pension funding through passive management alone,” it says. So the only reason to employ active managers, who currently oversee about 20 percent of the fund’s assets, is if they can effectively guarantee to deliver better returns than an index tracker.

As an incentive to generate that alpha, there'll be no limit on how much a manager can earn by outperforming. That's a groundbreaking development. But, at the same time, the base fee active managers get for looking after some of the pension fund’s assets will be cut to the “extremely low” level that GPIF, thanks to its sheer size, is able to squeeze from its passive portfolio.

Domestic Dominance
Japan's pension fund has more than half of its capital in domestic assets


Source: GPIF (Figures are for end of 2017)

Shifting to the new structure is the pension fund's attempt to address a problem that's plagued fund management for years: fund managers are rewarded for simply gathering assets rather than making returns. GPIF says that the old model gave firms "little incentive to set target excess return rates appropriately, to be innovative in seeking excess returns, and to control their management capacity." Only a handful of the external firms given money by the fund beat their targets.

Positive Contribution
Japan's pension fund has generated positive returns for six consecutive quarters


Source: GPIF

In an effort to align strategies with its long-term outlook, the fund will split performance-based fee payments, with 45 percent paid in the year they were earned and 55 percent delayed to the following year. And to avoid the short-termism that asset managers complain undermines performance when an investor withdraws cash after a short run of bad results, the pension fund is signing what it calls "multi-year contracts" with some of its chosen managers. It didn't specify how long those mandates will run for.

The fund, rightly, recognizes that its plan will have a big impact on the wider industry. GPF says it sees active managers playing an important role in the "day-to-day effort to improve market efficiency," which it says helps to augment the potential performance of its passive strategies. That's a sensible approach to the active-versus-passive debate, which can too often deteriorate into scaremongering.

Allowing asset managers to share in both the upside and the downside of their alleged investment expertise gives them more skin in the game. It should lead to some much-needed Darwinism, where only the fittest survive — and the fund management world will be healthier as a result.


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  #292  
Old 06-13-2018, 07:50 AM
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CANADA
https://www.ai-cio.com/news/canada-p...e-green-bonds/

Quote:
Canada Pension Plan Investment Board to Issue Green Bonds
The ESG-related securities will contribute to the fund’s $2.3 billion renewable energy investment plans.


Spoiler:
Canada’s largest pension fund is about to issue its first green bond, which will provide additional funding for its eco-friendly energy investments.

Based in Toronto, the $356 billion Canada Pension Plan Investment Board ((CPPIB) is planning to invest more than $2.3 billion in the renewable energy sector, in line with the low-carbon initiative many institutional investors are participating in. The fund says it is the first pension program to issue this type of bond.

Green bonds support environmental, social, and governance (ESG) projects, such as climate change-related investments. ESG bonds are tax exempt and can also provide tax credits. To qualify for “green” status, the bonds must be verified by a third party, such as the Climate Bond Standard Board. The Canada pension plan is working with the Center for International Climate Research for second opinions on green bond qualifications.

Green bonds have been around since 2007, and have risen in popularity with the increase in environmental awareness campaigns.

The Canadian pension board will invest green bond proceeds into renewable energy, sustainable water and wastewater management, and green buildings (designed and constructed around preserving our natural environment).

The board invests on behalf of the Canada Pension Plan, which covers some 20 million contributing workers and beneficiaries.

Poul Winslow, the fund’s senior managing director and global head of capital markets and factor investing, called the green bond issuance “a logical next step to [the] CPPIB’s investment-focused approach to climate change,” adding that the capital raised will help support the fund and its future success.

All Canadian green bonds will be issued on a private placement basis. The investment board did not specify when it will begin the issuance of the bonds.


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  #293  
Old 06-17-2018, 04:50 PM
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CHINA

https://www.caixinglobal.com/2018-06...101271104.html

Quote:
China to Take From the Pension Rich, Give to the Pension Poor

Spoiler:
China has decided to pull money from provincial-level pension funds to create a national pool to address growing pension deficits in poorer regions.

The arrangement will allow the central government to take a set amount of money from pension funds currently managed by provinces, municipalities and autonomous regions, and redistribute it to those with pension fund shortfalls, the central government said in a notice published Wednesday on its website.

The central government said this centrally controlled pool will balance the pension-fund burdens across the country and strengthen the overall pension system.


The change comes at a time when China is facing a looming demographic crisis because of its rapidly aging population and alarmingly low birth rate. At the end of 2017, China had 241 million people over the age of 60, who accounted for 17.3% of the country’s 1.4 billion population, according to the official Xinhua News Agency.

Generally, a population is considered to be aging when 10% of its population is over 60.

The number of newborns in China fell by 3.5% in 2017 to 17.23 million, despite the end of the one-child policy.

In 2017, China’s pension funds collected 3.3 trillion yuan ($515 billion) and handed out 2.9 trillion yuan in payments. As of the end of last year, the funds had an aggregate surplus of 4.1 trillion yuan. However, two-thirds of the surplus belonged to seven provincial-level areas, including Guangdong and Beijing.

The central fund will allow the government to create a pool from the pension surpluses of richer provincial-level areas to ensure that the poor regions can meet their pension obligations. If a local government failed to meet these obligations, it would be a big problem because so many retirees depend heavily on government pensions to survive.

Currently, provincial-level governments each fund their own pension funds by taxing workers’ wages. Some regions, such as Heilongjiang province, in China’s northeastern rust belt, are running pension deficits due to declining contributions from a net outflow of young workers who are frustrated by an ailing local economy.

Although every provincial-level area will have to contribute to the new fund, some will receive more than they contribute, You Jun, vice minister of Human Resources and Social Security of China, was cited by the Beijing News as saying.

The new fund will be able to collect around 400 billion yuan a year, according to Caixin’s calculation based on official data about the weighted average salary of urban workers.


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  #294  
Old 06-19-2018, 11:48 AM
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CHINA

https://www.ai-cio.com/news/china-sh...pension-plans/

Quote:
China to Shunt More Money to Ailing Provincial Pension Plans
Beijing will divert money from well-funded programs in bustling urban centers to subsidize struggling areas.
Spoiler:
The Chinese government will help out provinces reeling under the weight of increasing pensions burdens, by tapping retirement funds of more well-off provinces.

The goal of the new system is to keep the country’s basic pension system stable, amid an aging population that is swelling the benefit rolls and a migration of working-age people to urban areas. This exodus leaves more rural locales with fewer taxpaying citizens to fund the pension payouts.

Under the plan, at least 3% will be withdrawn from the better-funded plans and increase from there.

China’s government also wants more pension data tools, such as a search platform to check individual benefit payments, a watchdog for central pension fund adjustments, and a nationwide central database.

No increases are expected to be made to contributions from workers or companies.
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  #295  
Old 06-24-2018, 05:06 PM
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UNITED KINGDOM

https://www.ai-cio.com/news/uk-retir...ayment-errors/
Quote:
UK Retirees Face Pension Cuts Due to Overpayment Errors
Massive data-checking exercise finds mistakes dating back 40 years.


Spoiler:
Due to pension overpayment errors dating back four decades, tens of thousands of retired UK workers reportedly will face state pension reductions.

The revelation came after the errors were identified during the biggest data matching exercise involving retirement benefits in UK history, according to a report in the Financial Times. The review required thousands of public and private sector retirement pension plans to inspect the records of millions of workers who “contracted out” of a government plan that allowed them to accumulate additional state pension.

By contracting-out, employers and workers were allowed to pay reduced national insurance contributions, which lowered the state pension to which individuals were entitled. However, workplace retirement plans promised to replace part of employees’ state pension with a Guaranteed Minimum Pension (GMP) in return.

Although some of the overpayments date back 40 years, a recent UK High Court ruling found that defined benefit pension plans are not subject to a previously imposed six-year time limit to recover pension overpayments.

The review found discrepancies due to poor record keeping, errors, and missing paperwork. In one case, the Civil Service Pension Scheme, which has 1 million members, identified 22 million ($29.2 million) of overpayments relating to GMP errors.

Another review of GMP records for 500,000 workers in private sector retirement plans found between 10,000 and 15,000 of overpayments, with a similar number of underpayments, according to Willis Towers Watson. The over and underpayments ranged from 50 per year to more than 10,000 over a lifetime.

Steve Webb, who was the UK’s Minister of State for Pensions from 2010 to 2015, told the FT that when the state pension is worked out, a deduction is made to reflect the promises made by company pensions to replace part of a worker’s state pension.

“If it turns out that the value of those company pension promises is greater than previously thought, then the amount the state has to pay you is reduced,” said Webb.

Webb said it was possible that “tens of thousands of people”, including some who retired long ago, could face cuts to their state pension. “It’s a pound-for-pound reduction, so every extra pound of GMP is a pound off your state earnings-related pension until it’s reduced to zero.”

According to the FT report, the UK’s Department for Work and Pensions (DWP) said most inquiries raised as part of the GMP data-checking exercise did not affect the amount of an individual’s state pension. “However, where queries do result in changes, we are notified by HMRC [HM Revenue & Customs], and where the pension is in payment, review the award, and notify the individual of the change.”

The DWP said individuals “will not be expected to repay any overpayments,” however approximately 10,000 retired civil servants are expected to be told this year that their pensions will be reduced.

The data-checking exercise began in 2014, and is due to conclude in December.


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  #296  
Old 06-29-2018, 03:12 PM
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ISRAEL

https://www.jpost.com/Israel-News/Go...savings-561121

Quote:
GOODBYE ISRAELI PUBLIC PENSIONS, HELLO U.S. PRIVATE RETIREMENTS SAVINGS?
The crux of the problem is that longer life expectancies and much lower birthrates are putting a toll on pension systems throughout the aging Western world.

Spoiler:
lmost every developed country offers a public old-age pension. Except for the United States.

And Israel is increasingly emulating the privatized US model – with so many workers’ pension savings being tied up in the stock market, according to a critical study from Tel Aviv University’s Shoresh Institute.

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“Israel’s pension system is largely privatized, exposed to financial market volatility, and comprises a relatively small universal pillar,” the report says, “characteristics that underscore the government’s limited involvement” in ensuring robust pensions when compared to other developed countries.

High management fees are taking a hefty chunk out of pensions and government subsidies for private-sector pensions discriminating against the poor, argue the study’s authors, Prof. Ayal Kimhi and researcher Sarit Menahem-Carmi.

“Almost everything is privatized and subject to the risk in the stock market,” . Kimhi told The Jerusalem Post. “It’s good for the young people. They can get high returns on their portfolio.

It’s not so good for low-income people” who government-protected allowances would help the most.

The study also finds that women are considerably less protected than men in the current system.




“The benefits embedded in Israel’s pension system are not being fully utilized to prevent poverty among the country’s elderly,” the report states.

The crux of the problem is that longer life expectancies and much lower birthrates are putting a toll on pension systems throughout the aging Western world. (Israeli men enjoy the fifth highest life expectancy in the world.) Many other developed countries have responded by linking pensions to increasing life expectancies and changing work lifestyles – namely, a decline in manual labor.

Yet Israel has yet to sufficiently act, the two academics argue.

Locally, the retirement age for women has remained low, at age 62 despite their relatively long-life expectancies. (Men can retire at age 67.) To guarantee that women will collect more in monthly pension allowances, the retirement age could be raised.

“Raising the retirement age would give women more working years for the accumulation of pension contributions and returns on savings” leading to a greater monthly stipend.

Yet in 2017, legislation to equalize women’s retirement age with men was shelved.

Some opponents of the move say that many women already retire before the official retirement age.

To help lower-income workers, the two academics propose that the value of the National Insurance Institute’s old-age allowances be adjusted for inflation.

To pay for the increased benefits, they propose that the government rescind tax deductions on pension contributions for benefit high-income earners.

“Tax incentives on retirement savings contributions are regressive, as they do not pertain to workers who fall below the tax threshold,” the study finds.

Before 2008, private pension contributions in Israel were voluntary. Now it’s mandatory – although some low-wage workplaces violate the law and don’t contribute to their workers’ pensions. That has made tax incentives redundant.

Israeli basic National Insurance pensions are worth around a fifth of the average salary – with the average person earning NIS 10,200 ($2,790) monthly.

To put that into context, a family of two is considered to be poor in Israel if its income falls below NIS 5,216 ($1,430) per month.

Gross pension benefits for Israeli men come out to be around 60% of average income – putting Israel in the middle among developed nations rankings.

Major changes to the pension system include one that occurred in 2003 – at the height of the Second Intifada and when the finance ministry was under the control of Netanyahu – when the old age allowance was unlinked from the average salary and linked to the consumer price index.

That slowed down the regular increase, leading to a rise in the poverty rate.
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  #297  
Old 06-29-2018, 03:13 PM
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CHINA

http://www.sixthtone.com/news/100253...enior-proposes

Quote:
Give Up Your Pension for the Good of the Nation, Senior Proposes
One Chinese retiree has suggested that the government penalize citizens for claiming their old age entitlements.
Spoiler:
It’s no secret that China’s population is aging rapidly. In light of the economic challenges the nation faces, one member of the country’s swelling ranks of seniors has proposed an unusual and unlawful solution.

A senior citizen from eastern China’s Jiangxi province recently posted on an online suggestion portal that the government should reward people for “volunteering” to relinquish their pensions — and, eventually, punish those who claim their entitlements by confiscating their property or even deporting them.

Chinese netizens soon spotted, shared, and ridiculed the proposition on microblogging platform Weibo, where the topic has racked up more than 2.18 million views. Some sarcastically asked for the real name of the misguided patriot, saying that someone so determined “to do good deeds for the country cannot be so low-key.”

“Citizens of our city must think of the country more,” the resident wrote on the website of the Yichun Municipal Human Resources and Social Security Bureau. “Now that pensions are in short supply, people cannot just think of themselves, ignoring and infringing national interests.” The proposal added that through 2019, the government could reward citizens for voluntarily giving up their pensions before introducing a punitive system in 2020.

On June 22, the social security bureau responded that the suggestion is not feasible, as China’s Social Insurance Law entitles people to a monthly pension when they reach the legal retirement age if contributions have been made into their pension fund for at least 15 cumulative years.

Lu Quan, an associate professor at Renmin University who specializes in the pension system, told The Beijing News that the government must fulfill its legal obligation to provide pensions.

“No department will hold an individual to account if they do not claim their pension,” he commented. “But even if you don’t claim yours, you cannot ask other people to give up theirs, let alone ask the government not to fulfill its duty.”

Established in the ’90s, China’s pension system for urban workers has attracted much discussion in recent years as demand exceeds supply. A report from the Chinese Academy of Social Sciences shows that several regions risk running out of pension funds due to growing elderly demographics and recent economic reforms.

China’s population is quickly going gray, in part due to decades of family planning policies. By the end of 2016, there were some 230 million citizens aged over 60, according to China’s Ministry of Civil Affairs, accounting for 16.7 percent of the country’s total population, while the average monthly pension for retired employees of state enterprises that year was 2,373 yuan ($360) — a year-on-year increase of 5.4 percent.

Yet while the task of providing for such a teeming throng of seniors is no joke, the Jiangxi resident’s proposal provoked many wisecracks from Weibo users, who wondered where millions of Chinese pensioners would be sent. “Does [the proposal] mean to deport those retired or laid off to the U.S. or Sweden?” one user asked.
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Old 07-02-2018, 09:13 AM
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IRELAND

https://www.irishtimes.com/business/...ader-1.3550257

Quote:
Ireland’s ‘bizarre pensions landscape’ criticised by industry leader
Government plan for public consultation on auto-enrolment a ‘deflectionary tactic’

Spoiler:
Consultation on the proposed introduction of mandatory pension savings in Ireland misses the point: what is needed is simplification of Irish pension structures. At least that’s the view of Ireland’s pension trustees.

The Government is preparing to launch a public consultation on how best to introduce auto-enrolment to ensure Irish workers have an adequate pension in retirement. Less than half of private-sector employees currently have occupational pension cover.

Tommy Nielsen, chairman of the Association of Pension Trustees in Ireland, and legal officer at Independent Trustee Company, says the proposed consultation is “another tactic to deflect from what really needs to be done”. That, it says, is simplification of the system, which it claims does not appear to be high on the agenda.

Mr Nielsen argues that the current system – specifically the personal retirement savings accounts (PRSAs) introduced in 2002 – can accommodate auto-enrolment, simply by making contributions to them compulsory.

Focusing on yet another new layer of pensions, Mr Nielsen says, will simply means less focus on the most important question about auto-enrolment: who is going to pay for it?

Complexity, he argues, has become a defence for paralysis at the Department of Social Protection for 16 years.

The trustees say there are now 13-15 pension vehicles, where only one or two are needed. “With a bit of courage, pensions simplification could be simple,” says Mr Nielsen.

Personal pensions
Aside from the use of PRSAs as the vehicle for auto-enrolment, he is urging the Government to transfer unregulated pension buyout bonds into PRSAs and to end the practice whereby occupational pensions, including PRSAs, must be transferred to an entirely separate Approved Retirement Fund for payment – unless they are being paid out via an annuity.

The representative group, which is a strong proponent of small, self-administered pensions, also wants to eliminate personal pensions – used by the self-employed and those unable to join an occupational scheme. Mr Nielsen says these are expensive, with little consumer protection.

“The important thing is that personal pensions do not have any particular qualities which PRSAs do not have. To keep them is an unnecessary doubling up.” he says.

The APTI chairman suggests the creation of master trusts, into which large numbers of small employer occupational pensions are placed. These are already in place in the UK and have the advantage of lower running costs for each of the smaller schemes and an end to the proliferation of small schemes that has been identified by Government as a concern.

“No minister for social protection with a minimum concern for the welfare of pensioners would allow the current, bizarre pensions landscape to persist,” he said.
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Old 07-08-2018, 10:38 AM
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ITALY

https://www.reuters.com/article/us-i...-idUSKBN1JU1L8

Quote:
Italy pensions chief criticizes government over migrants, planned reforms

Spoiler:
ROME (Reuters) - Italy needs more migrant workers to help pay for the nation’s growing army of pensioners, the head of state pensions agency INPS said on Tuesday, openly criticizing the government’s anti-immigration agenda.

Tito Boeri also warned that government plans to reform the pensions system would be much more costly than coalition parties were predicting, saying demographic trends meant that even the existing system was unsustainable.

Italy’s new interior minister, right-wing leader Matteo Salvini, who has promised a severe crackdown on illegal immigration and mass deportations, accused Boeri of playing politics. “Where does he live? Mars?” Salvini wrote on Twitter.

Boeri, a university economist who was appointed pensions chief by the previous center-left administration, told the INPS annual conference that current forecasts pointed to Italy having just one worker per every pensioner by 2045.

“To maintain at a sustainable level the ratio between those who receive a pension and those who work, the number of immigrants is crucial,” Boeri said.

He said that if recent demographic trends continued, the Italian population would shrink by 300,000 within the next five years. “It is as if a city like Catania disappears,” he said, referring to the second largest city in Sicily.

“By halving the migratory flows in five years we would lose, in addition, a population equivalent to that of Turin,” he added, referring to one of Italy’s main industrial cities.

He said Italians were badly informed about the number of migrants living in the country, with locals on average claiming migrants made up 26 percent of the population, against the real figure of just nine percent.

“The difference between perception and reality is much more pronounced here than elsewhere. It is not just prejudice. It is real disinformation,” he said.

He also took aim at government plans to re-write a 2011 pension reform, that was named after then-Welfare Minister Elsa Fornero and which called for hikes to the retirement age.

The government is looking to introduce a system whereby someone’s age and the number of years they have worked are added together, with pensions available when the total reaches 100.

It has said this change will cost some 5 billion euros ($5.8 billion) a year, but Boeri predicted the true figure would be around 18 billion euros.

He added that “it was not possible” to turn back the clock on the Fornero reform, but said it could be made more flexible.

Boeri’s four-year mandate is due to expire in early 2019.
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Old 07-08-2018, 10:39 AM
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IRELAND

https://www.irishtimes.com/business/...ries-1.3552858

Quote:
Reducing tax relief on contributions will not solve pension crisis, say actuaries
Society of Actuaries rejects idea for SSIA-type scheme as way to make pensions accessible
Spoiler:

Reducing tax relief on pension contributions risks undermining the Government’s strategy to improve coverage and adequacy of income for people in retirement, pension advisers have said.

The Society of Actuaries in Ireland notes that significant reductions in relief have already been achieved with lower lifetime limits on pension funds and the elimination of relief from PRSI and USC.

It has broadly welcomed the Government Roadmap for Pension Reform, and particularly the introduction of auto-enrolment and a focus on pension charges.

However, in an initial submission to the Government’s consultation on the plan, it says the much-touted SSIA model of tax relief is not necessarily the panacea for the industry that its advocates believe.

SSIAs (Special Savings Incentive Accounts) were introduced by former minister for finance Charlie McCreevy. They offered savers a €1 government top-up for every €4 saved and matured within five years.

Some proponents maintain that the current tax relief system is too complex for many people to understand and have argued that an SSIA model should be adopted instead.

The Society of Actuaries accepts the SSIA-type approach might be easier to understand but says that it presents its own problems.

Taking the roadmap scenario where, for every 6 per cent of earnings a person saves, the State would contribute 2 per cent – effectively tax relief of 25 per cent, the submission said this would increase the cost of pension relief to the State for people who do not currently pay income tax or who pay income tax at 20 per cent.

At the same time, it would be a disincentive to continue current levels of pension savings for people paying income tax at the higher, 40 per cent rate.

That would undermine adequacy and run counter to the intention of the roadmap.

“Issues with achieving a target percentage [income] replacement ratio are most pronounced with middle-income earners,” the report says. “Reducing the tax incentives would run directly counter to improving the current situation for this group.”

Cost aside, the society has other issues with the SSIA model. First, it notes, SSIAs had a hard deadline that encouraged savers to make a decision. Close to half of all SSIAs were taken out in the month before the scheme closed to new entrants.

But pension savings were a lifetime exercise without such a deadline.

SSIAs were also short-term in nature with the money maturing in five years and being used by many people for big ticket purchases. That short-term window – with the prospect of access to the cash within a foreseeable time-frame – contrasts with pension savings that would not be accessible until retirement.

In any case, the actuaries say, even with the attractions of SSIAs, 60 per cent of Irish adults did not participate – effectively rejecting the offer of free money.

“In the light of the above, we would caution against assuming that adopting an SSIA-type approach will automatically lead to high pension take-ups,” the actuaries body says.
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