The Pensions Board sets out certification conditions for Sovereign Annuities
Wednesday 26 October 2011: The Pensions Board today published its certification conditions for sovereign annuities. Legislation facilitating the introduction of sovereign annuities was passed earlier this year, and the Board’s conditions set out what requirements insurance companies must meet if they wish to offer these products to scheme trustees.
A sovereign annuity is an annuity contract issued by insurance companies where the annual income payment is linked directly to payments under bonds issued by Ireland or any other EU Member State (known as reference bonds). Payments under sovereign annuities can be reduced due to an event of non-performance by the reference bonds. Sovereign annuities can only be purchased by the trustees of occupational pension schemes (both defined benefit and defined contribution schemes).
Insurance companies interested in offering such products must have them certified by the Board under Section 53B of the Pensions Act, 1990. Since the legislation was enacted earlier this year, the Board has been working on designing a suitable process to facilitate the certification of sovereign annuities. The application form for insurance companies to have their annuity products certified is now available on the Board’s website at www.pensionsboard.ie. The Board has published FAQs for insurers and trustees on sovereign annuities which are also available on the Board’s website.
Speaking today about the certification conditions for sovereign annuities, Brendan Kennedy, Chief Executive of the Board, said: “The introduction of the certification process for sovereign annuities, which is a novel concept, has been highly complex and technical and has required the dedication of considerable time and resources on the part of the Board. It has also involved considerable consultation with the insurance industry to ensure that a workable product design was achieved. In particular, the Board has prepared standard policy conditions for adoption by insurance companies when designing their respective sovereign annuity policies”.
Kennedy further stated: “It will be a matter for the trustees of a scheme to decide, having taken appropriate legal, actuarial and/or financial advice, whether or not to purchase sovereign annuities. The Board has no role in assessing the creditworthiness of the reference bonds underlying sovereign annuities. Further, the Board has no role in relation to the terms on which insurers make sovereign annuities available in the market place. Certification of a sovereign annuity policy is not to be taken as approval by the Board of the appropriateness of any individual policy or its use in any particular circumstances.”
Regulations are currently being prepared by the Board which will impose disclosure obligations on trustees who purchase sovereign annuities. Further guidance on these disclosure obligations will be provided in due course and will be posted on the Board’s website.
Note: 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
ENDS.
For further information, please contact:
David Malone Tel: (01) 613 1900
Head of Information
The Pensions Board
Editors notes:
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