IRELAND - Almost 80% of Ireland's defined benefit schemes have already closed or are likely to close to new employees, research shows.
The findings, announced at the Irish Association of Pension Funds (IAPF) annual benefits conference yesterday, revealed over two thirds (67%) of Irish companies have already closed their DB schemes to new members and another 12% consider doing so likely. In the last 18 months alone almost 20% of firms have closed their scheme.
"Irish defined benefit pension schemes are on a knife edge, many, having already reduced benefits and increased contributions, are now facing total wipe out of the savings of their workforce," said IAPF chairman Marie Collins.
Unlike other challenges that pension funds have faced, continued Collins, a solution for this crisis laid in the hands of the Government. She said it was counter-intuitive for any Government, which had "known for many years that it is facing a pension crisis, to appear to do very little to protect the pension savings of scheme members and to continue to threaten to remove tax relief from ordinary workers who are doing the right thing and saving for their retirement".
She added: "The fact is that over 70% of DB schemes are in deficit when measured against the minimum funding standard. This standard, we believe, is no longer fit for purpose. The IAPF has recommended and made strong representations to Government on the introduction of a new sovereign annuity. This would not only open up a new source of funding for the Exchequer but allow viable schemes continue with their long term objective of providing pensions for their members.
"As a society we have spent many years debating a National Pensions Framework but we must not lose sight of over €70bn ($98bn) of workers' retirement savings in occupational pension schemes. For the National Pensions Framework to be a success, occupational pension schemes must be seen as a critical part of the solution to deal with our country's pension time bomb. Occupational pension scheme members are not looking for bailouts or to be nationalised, but rather a fair and equitable way that they can save for the retirement.
"Time is running out to stop the wide scale destruction of DB savings. As our latest survey shows, to meet the Minimum Funding Standard, many schemes are reducing benefits for existing members, some to nil. If there's not enough to meet pensioners' benefits, they are also likely to have to take a cut.
"Let us not inflict any more hardship on the next generations. If we destroy what is there now, what will be left is a generation of workers, other than public servants, facing retirement hardship and depending on a much smaller workforce to support them in their retirement."
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