28 October 2011: The Minister for Social Protection, Joan Burton TD, has announced changes to the funding standard for defined benefit schemes. On foot of this announcement The Pensions Board will publish revised guidelines for defined benefit schemes in deficit by the end of 2011. It will also announce new deadlines by which schemes in deficit must submit a recovery plan to the Board.
The Board are currently working on the technical implementation of the Government’s announcement and expect to publish full updated guidelines by the end of the year on Section 49(3) and Section 50/50A guidance. The Board published its certification conditions for sovereign annuities on Wednesday 26 October 2011.
Speaking today about the re-introduction of the funding standard, Brendan Kennedy, Chief Executive of the Board, said: “The position of Irish pensions remains serious. Current economic circumstances mean that some pension savers and sponsoring employers have great difficulty in making the contributions necessary to make good the investment losses incurred in 2007-2009 and to meet the ever increasing costs of providing retirement benefits.”
The Board estimates that some 70% of defined benefit schemes are in deficit and in many cases the deficit is substantial. During 2009 and 2010, the Board granted a number of extensions to the statutory deadlines for submission of funding proposals. In mid-October 2010, the Board again deferred the deadline for the submission of funding recovery plans in response to the Government’s review of all defined benefit issues raised in the National Pensions Framework.
Kennedy stated: “The suspension of the funding standard deadline was a pragmatic decision taken by the Board to allow schemes time to deal with their funding deficits. Trustees of defined benefit schemes in deficit must prepare recovery plans and in many cases, submit them to the Board for approval. These plans must have two objectives – to eliminate the scheme deficits and to place the scheme on a stable footing so that members and their dependants can be reasonably confident that the benefits promised will be paid. When considering a recovery plan, trustees must do more than simply identify the minimum contribution rate needed to eliminate the deficit. Instead, trustees should consider the future of their scheme, its long-term prospects, the range of risks it faces, and the contributions which members and the sponsoring employer are willing to make. Trustees must recognise the contribution rate, the investment policy and, where relevant, changes to the benefits structure, as being interrelated, and the best solution is one that allows the scheme to undertake appropriate investment risk to achieve long term returns without such risk endangering the benefits already accrued by members.”
Kennedy further stated: “The revised guidelines will take account of the changes introduced by the Minister, and will also provide all the technical information needed by trustees and their advisers to prepare a recovery plan. The new deadlines will give the trustees adequate time to prepare funding plans in light of the new funding requirements, and that the first deadlines will be no earlier than 1 July 2012.”
The Board continues to up-date guidelines, information and FAQs on changes in relation to pensions as they occur. News of any changes is posted on the Board’s website. The Board provides a free “News by e-mail” alert service – which is available at www.pensionsboard.ie
For further information, please contact:
David Malone Tel: (01) 613 1900
Head of Information
The Pensions Board
The Pensions Board
The Pensions Board is the statutory body established by The Pensions Act 1990 to regulate occupational pension schemes, trust based RACs and Personal Retirement Savings Accounts (PRSAs) and to advise the Minister for Social Protection on overall pension policy development. See www.pensionsboard.ie