IRELAND - The Pensions Board has issued recommendations on the Social Welfare and Pensions Bill 2005, which makes a number of changes to the Pensions Act 1990, including amendments to the funding standard for defined benefit schemes.
The Board recommended that Ireland maintain the current funding standard, including the provision for an extended funding period in some circumstances, together with a modification of the calculation of the standard for active and deferred members.
“In Chapter 6.25 to 6.31, the Board recommends that the grounds on which funding period extensions are granted should be extended,” the authority said in a report to the Minister for Social and Family Affairs, Seamus Brennan. “The Board also recommends that the introduction of a State Annuity Fund be explored thoroughly because of the potential beneficial effect on the funding standard.”
Under the changes to the Pensions Act 1990, defined contribution schemes that pay pensions from the assets of the scheme, rather than buying an annuity from an insurance company, must prepare an actuarial funding certificate and otherwise abide by the funding standard. The Board predicted that the change would affect only a small number of schemes.
In addition, the grounds on which the Board may grant a scheme a period of more than three years to restore full funding are extended and early retirement from DB schemes will be subject to the consent of the trustees when the scheme actuary advises that the scheme would not meet the funding standard.
As part of its funding standard review, the Board recommended that in the wind-up of a scheme which provides index-linked or salary related pensions, the scheme trustees be allowed to purchase annuities with “fixed increases of equivalent value where it is not possible or practical to buy pensions exactly as specified in the rules of the scheme.”
The Board also committed to exploring the issue of pension protection arrangements to top-up benefits when a scheme winds-up with a shortfall in the medium term.
PP has compiled a list of what to watch out for over the coming months.
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In this week's Pensions Buzz, we want to know if you believe there is ever a case for combining retirement savings products with other savings products, and if the PPF levy for sponsorless schemes is appropriate for DB consolidators.