IRELAND - Defined benefit (DB) pensions are at risk if more is not done to ease the pressure on employers and trustees of underfunded DB schemes, the Irish Association of Pension Funds says.
Responding to changes to the funding standard announced by the government in the Social Welfare Bill and Pensions Bill 2005, the IAPF said.
“While the Bill goes some way to addressing the problem we don’t believe that it will solve all the current issues,” said Paul O’Brien, head of the IAPF benefits committee.
He said the Bill had effectively endorsed a continuation of the current position with some adjustments: “The additional protection for trustees introduced around the area of early retirements from underfunded schemes and the widening of the criteria for seeking an extension to the period over which deficits must be funded are both welcome changes.
“However, some of the more substantive changes considered by the Pensions Board as warranting further investigation, including the potential introduction of a State Backed Annuity Scheme, have not been catered for an IAPF would urge the Minister to move quickly in investigating these alternatives in the interests of members of Irish pension schemes.”
Patrick Burke, chairman of the IAPF’s trustee forum, said: “In an environment where defined benefit schemes are maturing, forcing such schemes to fund at a rate higher than necessary on an ongoing basis will detract from national competitiveness by requiring companies to utilise capital in an inefficient manner.”
The IAPF welcomed a change in the Bill that includes enabling legislation so that the provisions of the EU Directive can take effect by the required deadline of September 23 but questioned the requirement for cross border schemes to be “fully funded” at all times, when schemes established separately in Member States were allowed to fall below 100% funded, provided a restoration plan could be agreed with the regulator.
“This part of the Directive would seem to be a disincentive to multinational employers from establishing pan European defined benefit pension arrangements,” O’Brien said.
The Bill also prohibits borrowing within pension schemes, which the IAPF says “effectively reverses the freedom introduced in recent Finance Acts”.
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