Minister for Social Protection, Joan Burton T.D. launches The Pensions Board Annual Report 2010
Monday, 20 June 2011: Today, the Minister for Social Protection, Joan Burton T.D., launched The Pensions Board‘s Annual Report and Accounts 2010.
Speaking at the launch of the Annual Report, the Chairperson of The Pensions Board, Jane Williams said: “These are very worrying times for the members, employers and trustees of occupational pension schemes and for pensions in general. The effect of the recession is evident in the numbers participating in occupational pension schemes. This is a serious step back for pensions which could have lasting consequences.”
“Throughout 2010 the Board and the executive continued to work with the Department of Social Protection and Government to underpin stable pension provision during a time of international financial uncertainty, through regulation, providing policy advice and by being a source of objective and relevant information for trustees, members of occupational pension schemes and the general public. I look forward to our active participation in the implementation of the National Pensions Framework, launched by Government in March 2010. This work is ongoing and will continue throughout 2011,” said Williams.
The number of active defined benefit schemes registered with the Board fell from 1,307 to 1,108 during 2010. The number of active members in these schemes fell by 36,259 to 550,229 during 2010. The number of defined contribution schemes registered with the Board also reduced by 7,756 to 75,183 during 2010. The total membership of defined contribution schemes at the end of 2010 was 259,732 a fall of 7,177 members on 2009. However, the number of PRSA contracts in force grew by 16,252 during 2010 to 187,114 with total assets of €2.74 billion, an increase of €690 million since 2009. The overall fall in scheme membership is of concern because of the importance of personal saving to provide for retirement in addition to the State pension.
The Pensions Board estimates that as at 31 December 2010 75% of defined benefit schemes are in deficit and in many cases the deficit is substantial. During 2009 and 2010, the Board granted a number of extensions to the statutory deadlines for submission of funding proposals. In mid-October 2010, the Board again deferred the deadline for the submission of funding recovery plans in response to the Government’s announcement of an acceleration of a review of all defined benefit issues raised in the National Pensions Framework.
The Chief Executive of The Pensions Board, Brendan Kennedy said: “The suspension of the funding standard deadline is a pragmatic decision to allow schemes time to deal with their funding deficits. It is the Board’s intention to set a revised date as quickly as possible.”
Concerning investment risk Kennedy continued: “The greatest single issue faced by Irish schemes is investment risk and the failure to recognise this risk and to manage it is the main reason why so many people will have less at retirement than they expected. The Board is aware of specific schemes where trustees have taken steps to bring the investment risk into line with what the scheme can bear. In many cases, this involves a reduction in the proportion of scheme assets invested in equities. Everyone recognises that it is appropriate to make such changes over a reasonable period of time. However, it is now over three years since the markets crashed and all data, both in the Board and elsewhere show no noticeable reduction by Irish schemes of their aggregate equity exposure. The unavoidable conclusion is that, in very many cases, trustees have not faced up to the issues, and are continuing to expose the benefits of their members to significant risks of further losses.
The losses suffered by members of defined contribution arrangements are in most cases similar to those of defined benefit schemes, though they have usually received less attention. This makes it more important than ever that the trustees of defined contribution schemes fully discharge their responsibilities so that members’ pension savings are as well managed as possible.”
In the second half of 2010 the Board began on-site inspections of Registered Administrators (RAs). This is in keeping with the Board’s overall risk-based approach to supervising pensions. These inspections enable the Board to assess whether members’ benefits are being calculated properly.
Commenting on the on-site RA inspections, Kennedy said: “the Board was generally satisfied with the overall level of compliance by the RAs inspected. However, there were a number of areas that came to light during the inspections and a report on these is posted on the Board’s website. We will continue to carry out RA on-site inspections throughout 2011 and beyond.”
Finally, Kennedy drew special attention to the ongoing pension compliance issues in the construction sector. He stated: “during 2010 the Board continued to investigate a substantial number of construction related cases where employee pension contributions have been deducted and have not been passed on by the employer to the Construction Workers Pension Scheme.
On foot of such, the Board uses its powers under the Act as necessary. This includes prosecuting the companies concerned and their directors in their personal capacity where appropriate. Failure to pay contributions to a pension scheme jeopardises the future retirement income of members and their dependants. While the number of reported cases was down in 2010 this issue is still a major concern for the Board.”
The Annual Report highlights that at the end of 2010, there were:
809,961 members in 76,291 occupational pension schemes broken down as follows;
- 222,072 members in 1,013 defined benefit schemes – subject to the funding standard
- 328,157 members in 95 defined benefit – not subject to the funding standard
- 259,732 members in 75,183 defined contribution schemes
- this is a decrease of 43,436 members in occupational pension schemes compared to 2009
187,114 PRSA contracts with total assets of €2.74 billion – an increase of 16,252 contracts and €690 million in assets since 2009
185 Registered Administrators (RAs) on the Board’s register of RAs – no RAs were refused renewal or had their activities restricted in 2010
81 suspected cases of deduction and non-remittance of pension contributions by employers in the construction sector were reported to the Board. 74 cases were closed during the year.
During 2010, the Board:
carried out five on-site inspections of Registered Administrators (RAs)
carried out 19 scheme inspections by calling in a range of trustees/ and pension administrators to meetings with the Regulation team.
issued on-the-spot fines notices (€2,000 per fine) to 76 trustees of 37 schemes – the grounds for these fines notices included:
- 20 schemes for failure to submit or late submission of actuarial funding certificates
- 10 schemes for non-payment of Pensions Board fees
- six schemes for late preparation of Trustee Annual Reports
- one scheme for failure to furnish options on leaving service
successfully took two prosecutions
- one prosecution for failure to submit an actuarial funding certificate
- one prosecution for failure to remit pension contributions deducted from employee’s wages
began seven other prosecution cases during 2010 for failure to remit pension contributions deducted from employees’ wages and failure to submit an actuarial funding certificate
delivered the National Pensions Awareness Campaign on behalf of the Government
dealt with 7,139 information enquiries
presented 330 people with their certificates for successfully completing the Board’s online trustee training course
The Annual Report 2010 report is available on www.pensionsboard.ie.
ENDS.
For further information, please contact:
David Malone Tel: (01) 613 1900 /087 6857743
Head of Information
The Pensions Board
Editor’s 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
The Funding Standard
The funding standard was introduced in 1991 in order to set out the minimum assets that a defined benefit pension scheme must hold and what steps must be taken if the assets of the scheme fall below this minimum. Under the Pensions Act, Defined Benefit schemes are required to submit an Actuarial Funding Certificate (AFC) to the Board every 3 years. An AFC indicates whether or not a scheme could meet all its liabilities were it to wind up on the effective date of the AFC. If the AFC indicates that the scheme is underfunded this triggers a requirement that a Funding Proposal be submitted to the Board which must outline how the scheme intends to bring itself back to full funding of its liabilities by the time of the preparation of the next AFC (i.e. within 3 years). In certain circumstances the Board may allow for the trustees of the scheme a longer period than 3 years in which they propose to rectify the underfunding of the scheme.