Ms Roma Burke:

The Senator has raised very interesting questions. It is not something that comes up a lot but it can be a shock to people when one partner in a relationship passes away and all of a sudden people are not just dealing with the loss of somebody close to them but also a change to their financial circumstances. When we think about it, pensions are made up of a number of pillars. I called them three legs of a stool. One leg of the stool is the State pension, the second leg is a workplace pension arrangement that provides income in retirement and the third leg is saving extra on a voluntary basis. This becomes more important to people the closer they get to retirement.

Starting with the first leg of the stool, when one person passes away there is a living alone allowance that kicks in. Just like the comment on continuing PRSI contributions if working arrangements have changed, it is key that people understand their rights and entitlements in the event of a change to their family circumstances. One way to deal with this is to ensure people know what they can apply for in the event their financial situation has changed.

With regard to the second leg of the stool, which are occupational pensions, there are two types of pensions. There is the defined benefit pension where people get their pension based on their salary and service. There is also the defined contribution pension where people save a pot. The defined benefit pension is good to the extent that once it comes into payment it is guaranteed for life. It is very predictable. It generally has a survivor's pension attached to it. If the person who earned the pension passes away there can be a benefit to the spouse, which is typically 50%. There is a drop and I will come to this. On the other side of the equation, the other workplace pension is the defined contribution pension. In this situation people build up a pot of money to the point of retirement.

When one reaches retirement, one can choose to secure an annuity, that is, a pension with an insurance company, or to secure an approved retirement fund. The latter is simply a post-retirement account from which one draws down money when one needs it. The good thing about an approved retirement fund is that the pot of money stays there regardless of whether one person has died. That is a plus on that side. The negative side is that if one is drawing money from a pot, there is a risk of running out of money. There are pros and cons. This is what makes pensions complicated. These are big decisions relating to big pots of money after one has worked a full working lifetime. If people are concerned about their financial situation after retirement, there are ways to address that issue.

The third leg of the stool is encouraging people to put more money aside. That is done through pension campaigns. Several years ago, there was a pensions week but that is less prevalent now, although there are other measures. A campaign such as that to encourage people to save into a very long-term rainy day fund to ensure they are self-sufficient would be of benefit. The Senator mentioned that many people are too proud to approach their sons or daughters for financial help. If one can start early and make provision for oneself, one will have the confidence that one will not need to approach one's sons or daughters. The third leg is about being proactive and saving money. The State provides very valuable tax incentives to do so. It is very worthwhile. There is significant encouragement to put money away.

The Senator referred to presentations to local authorities. One of the positive things to come from Covid is the increase in virtual online communication. One no longer has to physically attend meetings. Part of my day job involves meeting groups of employees who are members of pension plans to explain what they should be doing, why it is important, the tax reliefs available and so on. In a single day, I was able to give presentations to almost 500 people through a series of sessions. The new online environment means we can do that with local authorities or any other organisation. Where we can help to facilitate that, we would be more than happy to speak to the CIB if it needs any sort of expert input in that regard. It is not really a big deal to do so now because we are all able to use these tools to communicate with each other.