Irish Pensions Magazine Spring 2013
6
We will continue to liaise with Government on these issues in the coming months to ensure the policy decision
that has been made will be implemented in a fair and practical manner.
One of the other areas of focus in recent years has been on defined benefit pensions. We recognise that many
defined benefit schemes are entering a run-off phase and it is critical to facilitate as much as possible an orderly
run-off over time. We must however prevent schemes that want to continue, being forced to wind up because of
legislative or short term market pressures. Where it is not viable for a scheme to continue, we must remove the
spectre of a grossly inequitable distribution of assets, where some individual members lose out heavily.
The priority order on wind up has to be changed to achieve this. We have developed a common proposal with
IBEC, ICTU and the Society of Actuaries in Ireland which would introduce much greater fairness into the system
while at the same time giving increased flexibility to pensioners in the event of a scheme winding up. This
proposal could also help with the funding proposal position of schemes as it could reduce the need to reserve
all benefits on the very expensive annuity buy-out basis that applies presently.
We believe that regulators and policy makers have completely lost sight of the long term nature of pension
schemes with funding and accounting regulations focused heavily on the short term and the requirement to
value based on bond yields, no matter what their level.
In the UK, the chairman of The Pensions Regulator has warned trustees against what he termed “reckless
prudence” in the current bond environment.
Prior to the introduction of the new Funding Standard, we wrote to the Minister for Social Protection stressing
that risk reserves should not be turned on in such difficult interest rate conditions and that doing so could break
many otherwise viable schemes. We continue to hold this view.
This is not to say that defined benefit schemes do not have to re-evaluate their promises, or should not seek to
reduce risk. But it seems utterly illogical just how high the bar has been raised in private sector schemes, when
compared to unfunded public sector schemes where the liabilities are far greater. Why does the State force
private sector schemes to stare so hard into the mirror at the financial impact caused by these market forces,
yet at the same time exempt its own pension promises from any remotely corresponding rigour or action?
The pension landscape in Ireland maintains its shift towards defined contribution provision and the IAPF
continues to be focused on the fundamental issues of coverage and adequacy.
The Association has engaged throughout the year with the OECD which is conducting a review of the overall
pensions system in Ireland, and we will continue to do so.
While policy makers grapple with the ideas of introducing mandatory or soft mandatory auto-enrolment, we have
emphasized that such steps to increase coverage should not be taken at the expense of reducing adequacy or
if you like creating a race to the bottom, as has occurred in some other countries.
We are also conscious of the need to continue to support trustees of defined contribution schemes in ensuring
they have good governance, investment choice and effective member engagement. We were delighted that
further schemes were awarded the DC Pensions Quality Standard in 2012 and hope that many more will follow.
Maurice Whyms
Chairman
Review
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