“The Pensions Board will extend the timeframe for defined benefit schemes to submit funding proposals”

Wednesday 13 October 2010:The Pensions Board will extend the timeframe for defined benefit schemes dealing with funding deficits to submit funding proposals for approval. The Board will announce shortly the new extended timeframe for such proposals.

This Board decision follows the announcement, earlier today by, Minister for Social Protection, Éamon Ó Cuív TD that the Government has decided to expedite the proposal to move to a “new” defined benefit pension scheme model as outlined in the National Pensions Framework. 

The National Pensions Framework agreed by Government in March 2010 recognised the difficulties with the current design of defined benefit schemes and proposed an alternative approach to the design.  Following the decision to expedite its work on this new defined benefit model the Department of Social Protection will aim to introduce it following legislative changes on 1 July 2011.

During considerations for this new model the Department will look at issues regarding the governance of defined benefit schemes, the basis for the funding standard (including areas such as risk management, smoothing out effects of changes in the bond markets) and strategies for transitioning schemes to this new model. A full consultation process will take place with all stakeholders including employers, trade unions and the pensions industry in developing this new model.

ENDS.

For further information, please contact: 

David Malone                       Tel: (01) 613 1900
Head of Information
The Pensions Board                                     

Notes:

The National Pensions Framework

This framework sets out the Government's intentions for radical and wide-scale reform of the Irish pension system. It sets out a fair and equitable approach that encompasses all elements necessary for future pension provision. The State will continue to provide the bedrock for the pension system with the State Pension, while employers and individuals will be encouraged to share the responsibility with Government to save and provide for the future. The National Pensions Framework is the result of a comprehensive public consultation process that began with the publication of a Green Paper on Pensions in October 2007. Development of the Framework was also informed by the proposals in the McCarthy Report and the Report of the Commission on Taxation. An implementation group has been set up to establish the technical, administrative and legislative infrastructure required to put these reforms into operation.  It is expected that this technical work will require three to five years to complete. There will be ongoing consultation with all interested parties on the details during this time. 

For further details visit: http://www.pensionsgreenpaper.ie

The Funding Standard

The funding standard was introduced in 1991 in order to set out the minimum assets that a defined benefit pension scheme must hold and what steps must be taken if the assets of the scheme fall below this minimum. Under the Pensions Act, Defined Benefit schemes are required to submit an Actuarial Funding Certificate (AFC) to the Board every 3 years.  An AFC indicates whether or not a scheme could meet all its liabilities were it to wind up on the effective date of the AFC.  If the AFC indicates that the scheme is underfunded this triggers a requirement that a Funding Proposal be submitted to the Board which must outline how the scheme intends to bring itself back to full funding of its liabilities by the time of the preparation of the next AFC (i.e. within 3 years).  In certain circumstances the Board may allow for the trustees of the scheme a longer period than 3 years in which they propose to rectify the underfunding of the scheme.

Section 50/50A decisions

The Board’s power to issue a direction under section 50 and/or grant consent under section 50A is discretionary.  The Board is not obliged to issue a direction or grant consent to a section 50/50A amendment in any case.  If the Board decides to issue a direction under section 50 and/or grant consent under section 50A, it may do so on such terms as it considers appropriate.  Any such terms will be specified with the Board’s decision.  The Board will inform the trustees of its decision as regards an application for the purposes of regarding a section 50/50A.  Where the Board issues a direction under section 50 and/or grants consent for the purposes of section 50A the trustees should inform the Board when the section 50/50A amendment has been effected in accordance with the requirements detailed in section 50(3)(b) of the Act.