Tuesday 9 February 2010: The Pensions Board today released its Review of 2009 - a fact sheet and commentary giving an overview of the activities for last year. The Board will publish its formal annual report for 2009 later in the year.
At the end of 2009, there were:
- 853,397 members in 84,226 occupational pension schemes broken down as follows;
- 254,325 members in 1,192 defined benefit schemes - subject to the funding standard
- 332,163 members in 95 defined benefit - excluded from the funding standard
- 266,909 members in 82,939 defined contribution schemes
- this is an increase of 4,189 members in occupational pension schemes compared to 2008
- 170,862 PRSA contracts with total assets of €2.05 billion an increase of 15,230 contracts and €850 million in assets since 2008
- 89,959 employers who have designated a PRSA Provider an increase of 1,746 compared to 2008
- 194 Registered Administrators (RAs) on the Board's register of RAs - no RAs were refused renewal or had their activities restricted in 2009
- 169 suspected cases of deduction and non-remittance of pension contributions by employers in the construction sector reported to the Board
- the Board carried out 9 on site investigations
- 94 cases were closed
- 17 employers entered into payment schedules
- €4,291,349 was the value of restored contributions from cases closed
During 2009, the Board:
- issued on-the-spot fines notices (€2,000 per fine) to 51 trustees of 18 schemes - the grounds for these fines notices included:
- 16 schemes for failure to submit or late submission of actuarial funding certificates
- 1 scheme for non-payment of Pensions Board fees
- 1 scheme for failure to furnish options on leaving service
- undertook 3 prosecutions
- one prosecution for failure to submit an actuarial funding certificate
- two prosecutions for failure to remit pension contributions deducted from employee's wages
- held meetings with the trustees of 54 schemes and with a range of pension administrators
- dealt with 7,259 information enquiries
- had 601,419 visits to its website an increase of over 20% on 2008
- developed an online e-learning system for pensions scheme trustees
- published the Trustee Handbook 3rd Edition
- published a new booklet "Retirement options for public servants"
- published a new "Investment Risk, Fees & Charges Checklist"
Commenting on the review, the Chief Executive of The Pensions Board, Mr. Brendan Kennedy said: "Much of the work of The Pensions Board in 2009 was a direct or indirect result of the Irish and global economic crisis. The problems for pension savings continued last year, despite good investment returns. The Board is very concerned with the effect on defined contribution and defined benefit schemes of investment losses since 2007, and especially the obligation on defined benefit schemes to tackle their deficits."
Despite good investment returns for almost all schemes in 2009, many defined benefit schemes still have substantial deficits. The Board estimates that about 80% of defined benefit schemes were in deficit at the end of 2009. Emphasising the importance of the security and protection of pension scheme member's benefits Mr. Kennedy stated: "What determines whether a pension scheme can meet its obligations is not regulation, not the funding standard, but the prudent management of that scheme by its trustees and the support of the sponsoring employer on an ongoing basis. It is vital that the promises made to scheme members are realistic and deliverable"
Mr. Kennedy further added: "As highlighted in previous years, the Board is concerned that the investment and funding of too many defined benefit schemes are based on aggressive investment return assumptions and do not take enough account of investment risks and downsides. Defined benefit scheme funding needs to be sustainable for the long term, and trustees must therefore consider realistic costs, investment risks, and the ability and willingness of the employer to support the scheme."
The Board is acutely aware of the complex industrial relations and protracted negotiations that many schemes are involved in while trying to tackle the deficits in their schemes. Following the introduction of legislatives changes in the April 2009 Social Welfare and Pensions Act, the Board extended the deadline for defined benefit schemes to submit funding proposals for approval. The Board expects to start receiving the first tranche of these funding proposals by the end of June 2010 so trustees and employers in all schemes have to focus, as a matter of urgency in order to meet these deadlines. Where schemes do not meet the deadline, The Pensions Board will take steps against the trustees and/or the scheme.
As outlined in the Boards guidance for section 50/50A applications, before making an application, the trustees must consider all options to address the scheme deficit. The objective of the review is to ensure that an application under section 50/50A is appropriate and, if granted, that the trustees are satisfied that the scheme will provide a sustainable level of benefits and will be funded and invested appropriately.
A reduction of benefits under section 50/50A is a serious loss for scheme members. Therefore, the Board will consent to an application only where it is satisfied that the proposed future operation of the scheme is robust enough to make any further application unlikely. The nature and amount of the reduction in benefits is a matter for the trustees. The aggregate reduction in benefits must, on its own or in conjunction with a funding proposal, be sufficient that the scheme will satisfy the funding standard and secure the future benefits for the members of the scheme.
The Annual Review 2009 report is available on www.pensionsboard.ie.
For further information, please contact:
David Malone Tel: (01) 613 1900
Head of Information
The Pensions Board
Andrew Nugent Tel: (01) 613 1900
Assistant Head of Information
The Pensions Board
Jackie Gallagher Tel: (01) 475 1444 / 087 237 1838
Q4 Public Relations
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.
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.