The State must consider compelling people to take out pensions if it wants to reach its goals for retirement provision, the chief executive of life and pensions company Friends First has said.
Mr Adrian Hegarty also wants the Government to look at giving all PAYE workers the right to take out an approved retirement fund (ARF) when they retire so pensions coverage can be raised.
In the near term, Friends First is urging the Government to do away with the 23 per cent exit tax on Special Savings Incentive Accounts (SSIAs) where holders decide to roll the proceeds into a pension. The firm has worked out that it would cost the Exchequer €230 million if half of the estimated total €15.6 billion in SSIA proceeds could be rolled over.
Mr Hegarty was speaking at a presentation of Friends First's 2004 results. The firm posted overall profit growth of 34 per cent for the year, but suffered a significantly weaker performance within its pensions business.
Mr Hegarty attributed the differential, which saw regular premium pensions sales fall back by 4.2 per cent to €38 million, to the firm's concentration on higher-margin products in other areas.
Friends First has not focused on selling personal retirement savings accounts, which it believes are too low margin to be worthwhile for medium-sized providers.
"Pensions coverage is fundamentally stuck at 52 per cent," Mr Hegarty said. He said compelling employees to take out pensions could be the "least worst" option in getting more people to organise retirement provision.
Friends First is urging the Government to pay particular attention to its proposal on extending the availability of ARFs to all workers. These structures, which offer a flexible alternative to annuities, are closed to people in occupational pension schemes, unless they make additional voluntary contributions.
Overall group profits at Friends First grew by one third to €27.1 million in 2004. The largest contributor to this was the firm's life division, which saw profits grow by 5 per cent to €16.8 million, driven ahead by healthy sales of single premium products.
The company's finance company, which was withdrawn from sale last year, also delivered solid growth, with profits rising by 75 per cent to €3.5 million.
Friends First also benefited from the activities of four "developmental businesses" engaged in activities such as securities lending and third-party administration, which together delivered profits of €6.8 million, or a quarter of the group total.
Mr Hegarty said the firm was expecting organic growth across all activities in 2005 but would not rule out expanding through acquisition.
"We will look at M&A opportunities as and when they arise," said Mr Hegarty, adding that the company's parent, Eureko, would allocate any necessary funds.
