18 May 2016: Today, the Pensions Authority publishes a set of statistics for defined benefit (DB) schemes which have been compiled from analysis of Annual Actuarial Data Returns (AADRs).
Some of the findings from the data include:
• the number of DB schemes subject to the funding standard is 666 (down from 703 schemes in 2014)
• the total assets and liabilities of theses schemes are respectively €60.4 bn. and €58.5 bn.
• the total assets and liabilities of the 50 largest schemes are respectively €42.6 bn. and €42.1 bn. – which represents approximately 70% of the total liabilities for all active and frozen DB schemes
• although pensioners account for 15% of the membership numbers, they represent 58% of the overall liabilities
• 463 (70%) of schemes were reported as meeting the funding standard at their most recent actuarial certification date, compared to 58% at the time of the last survey
• of the 203 schemes which do not meet the funding standard, almost all have embarked on funding proposals. The ‘real’ total deficit, i.e. excluding surpluses, is almost €3.7 billion, which is about 16% of liabilities of those schemes
• at the end of December 2015, there were nine schemes where no funding proposal is in place. For each of these schemes, the Authority has begun the process of deciding whether to use its powers under the Pensions Act to direct trustees to reduce benefits or to windup the scheme.
Commenting on the data, the Pensions Regulator, Brendan Kennedy said: “The data published today shows that the long-term trend of falling numbers of DB schemes and members continued in 2015. However, our survey also demonstrates the continuing importance of DB pensions with assets of more than €60 bn.
The Regulator stated that “The most significant concern for the Authority continues to be the ongoing vulnerability of DB schemes to investment market risk. 70% of DB schemes now meet the funding standard which is a considerable improvement over recent years, but there is no room for complacency as the scheme data makes it very clear that the position of DB schemes remains very fragile. Furthermore, it must be remembered that the funding standard is a minimum, and achieving the funding standard is certainly no guarantee that a scheme will always be able to meet its liabilities.”
The Regulator went on to say: “Our analysis of the most recent asset data shows 44.5% in the “financial” category and 56.6% in “real” assets. This increase in financial assets, compared to the 2014 figure of 41.5% roughly corresponds to the increase in pensioner liabilities, so overall the level of investment risk being accepted by schemes remains high. This strategy entails considerable risk, which will fall especially on the younger members of the schemes. High risk is not an appropriate approach to take where the benefits cannot otherwise be afforded.
The significant improvement in the funding standard results is very welcome. However, it must be understood that the standard is a minimum legal obligation only and meeting it will not ensure that benefits will always be met. The Authority continues to be concerned at the paucity of evidence of proper risk measurement and management among DB schemes. ”
In line with the Authority’s published financial management guidelines we will focus on investment risk management processes as a key element of our ongoing programme of direct engagement with DB scheme trustees.”
For further information, contact:
David Malone Head of Operations and Communications The Pensions Authority Tel: (01) 613 1900
Note to Editors
The Pensions Authority is the statutory body established by the Pensions Act, 1990 to regulate occupational pension schemes, trust based RACs and Personal Retirement Savings Accounts (PRSAs). www.pensionsauthority.ie