Notes on Changes to the Funding Standard
Friday 11 February 2005:
1. The purpose of this note is to clarify, in broad terms, the changes to be made to the Funding Standard arising from the Pensions Board’s Report (Review of the Funding Standard – Report to the Minister for Social and Family Affairs, December 2004) and the Social Welfare and Pensions Bill, 2005 ( published on 11 February 2005).
2. A separate note (on the Board’s website) in relation to Social Welfare and Pensions Bill, 2005 outlines the Bill’s provisions related to occupational pensions and PRSAs including those related to the Funding Standard. The Board’s Report is also included on the Board’s website.
3. The overall position regarding the Funding Standard, going forward, is that, as recommended under Option A in the Board’s Report, the present Standard will remain subject only to a modification of the basis of calculation of liabilities in respect of active and deferred members.
4. The modification at 3. will be a matter for guidance to its members by the Society of Actuaries.
5. The Standard, going forward, will include the measures which allow the end date of a funding proposal to be extended beyond that of the next Actuarial Funding Certificate. These measures, introduced in Social Welfare (Miscellaneous Provisions) Act, 2003, and intended to apply on a short-term basis, will become a continuing feature of the Funding Standard.
6. As required separately by EU Council Directive 2003/41/EC of 3 June 2003 the interval between the latest effective dates of actuarial funding certificates is being reduced from 3 ½ to 3 years.
7. The existing measures allowing for extended end dates for funding proposals are being amended to widen the grounds of eligibility for access by schemes to the measures. In addition to the present test regarding the impact of investment factors on assets, the impact of various factors (to be prescribed in Regulations) on scheme liabilities will also become grounds for eligibility. The Board’s Report indicates the type of factors which will be considered for inclusion in the implementing Regulations.
8. It is proposed that, following enactment of the Bill, the Board will issue revised guidelines on the operation of the measures at 7.
9. Finally, it might be noted as a matter related to the Funding Standard, that the Board’s Report recommends that schemes which fail the Standard be required to disclose to members the funding position of the scheme by class of member and benefit. Implementation of this recommendation will be a matter for consideration in the present revision of Disclosure Regulations.