Minister for Social Protection, Joan Burton T.D. launches The Pensions Board Annual Report 2011
Friday, 22 June 2012: Today, the Minister for Social Protection, Joan Burton T.D., launched The Pensions Board‘s Annual Report and Accounts 2011.
Speaking at the launch of the Annual Report, the Chairperson of The Pensions Board, Jane Williams said: “The State pension is the first pillar of pensions’ provision. Occupational pensions are an important second pillar. This year’s annual report shows that the total number of active members in occupational pension schemes at April 2012 was 771,878, a decline of some 38,083 members over 2010 levels. The number of PRSA contracts in force grew by 10,924 during 2011 to 198,038 with total assets of over €3 billion. While the fall in occupational pension scheme membership can be expected as a consequence of declines in employment and contractions in the economy it is of serious concern for the Board given the importance of personal savings to provide for retirement in addition to the State pension.”
The Chairperson went on to say: “Looking to the future, the Board will continue to participate actively in the implementation of long-term pension policy that will promote better pensions security and long-term stability. The Board also participates in European activities through its membership of the European Insurance and Occupational Pension Authority (EIOPA) in order to contribute to and anticipate developments that will affect Irish pensions.”
At the Annual Report launch the Chief Executive of The Pensions Board, Brendan Kennedy said: “Over the last number of years, occupational pension scheme security and sustainability, especially for defined benefit schemes in deficit, has been a major concern for the Board. On 7 June 2012, the Board published new rules which set out funding rules for defined benefit schemes and what steps they must take if they do not.”
The key changes contained in the new rules are as follows:
- a risk reserve will be required with effect from 1 January 2016
- where schemes hold sovereign annuities or sovereign bonds they will be allowed credit for these in their funding standard calculations
- schemes will normally be allowed until 2023 to clear existing deficits.
These rules follow recent changes to the Pensions Act, which were in the Social Welfare and Pensions Act 2012. The full set of rules, is published on the Board’s website www.pensionsboard.ie.
Mr Kennedy stated: “As many as 80% of defined benefit schemes are in deficit and in a number of cases, the deficit is substantial. The Board has published deadlines by which these schemes must submit funding proposals to tackle these deficits. The first of these deadlines falls on 31 December 2012. It is now up to trustees to prepare and submit proposals which will put the finances of their scheme on a long-term stable footing.”
Mr Kennedy added: “Defined benefit pension schemes have made long-term pension promises to their members. Our objective must be to see as many defined benefit schemes as possible put on a secure footing and prudently managed so that the members receive the pensions they are expecting.”
At the launch Mr Kennedy also commented on the prosecutions undertaken by the Board: “Where the Board uncovers non-compliance with the Pensions Act or receives whistleblow reports to that effect we will have no hesitation in taking appropriate action right up to and including prosecution. In recent years prosecutions have almost entirely been where employers have deducted contributions from employees’ wages and not passed them on to the pension scheme, that is, they kept them.”
Mr Kennedy went on to say: “It is worrying that the volume of cases notified to us is still very high. Furthermore, we know of a number of cases where offending companies have been put into liquidation and the same directors immediately start a new business and continue their deductions and failure to remit. Our prosecution of these cases takes up a considerable amount of Board resources, which reflects the seriousness of the problem and of the offence. We welcome the fact that the Courts are treating these offences with the seriousness that they merit.”
During 2011, the Board:
- successfully prosecuted 26 cases – there are currently 36 cases pending for 2012
- carried out 13 on-site inspections of Registered Administrators (RAs) and PRSA providers
- carried out 25 scheme inspections by calling in a range of trustees/ and pension administrators to meetings with the Regulation team
- had fines totalling €14,000 paid over by seven trustees of three schemes (€2,000 per fine)
- delivered the National Pensions Awareness Campaign on behalf of the Government
- dealt with over 6,500 information enquiries.
The full detailed Annual Report 2011 report is available on www.pensionsboard.ie
The Board continues to up-date guidelines, information and FAQs on changes in relation to pensions as they occur on the Board’s website. The Board provides a free “News by e-mail” alert service – which is available at www.pensionsboard.ie
For further information, please contact:
David Malone Tel: (01) 613 1900 /087 6857743
Head of Information
The Pensions Board
Jackie Gallagher Tel: (01) 4751444 / 087 2371838
Q4 Public Relations
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
Funding standard risk reserve
The Social Welfare and Pensions Act 2012 further amended the Pensions Act to require the trustees of a defined benefit scheme hold a risk reserve. The concept of a risk reserve has been introduced with effect from 1 June 2012 and from 1 January 2016, schemes will be obliged to put in place a recovery plan if they do not hold the reserve. In addition to the submission of an actuarial funding certificate, trustees of pension schemes will now be required to submit a funding standard reserve certificate. If either certificate indicates that the scheme does not satisfy the relevant funding requirements, the scheme must, except in certain circumstances, submit a funding proposal to the Board to restore funding by the next funding certificate date.
The Social Welfare and Pensions Act 2010, as amended, facilitated the introduction of sovereign annuities as an option for schemes to consider as part of their funding plans. A sovereign annuity is an annuity contract issued by insurance companies where the annual income payment is linked directly to payments under bonds issued by Ireland or any other EU Member State (known as reference bonds). Sovereign annuities can only be purchased by the trustees of occupational pension schemes. Further information and guidance on sovereign annuities and bonds is available on the Board’s website.