MORE THAN half the defined benefit pension schemes in Ireland have now closed their doors to new entrants, according to a new survey, with many more considering the option.
And 20 per cent of funds say they are now looking at taking more drastic action, such as closing funds to future service for existing employees, an option that was considered by only 6 per cent of funds until now.
The results of the Irish Association of Pension Funds (IAPF) survey of defined benefit schemes were released yesterday at its annual conference in Dublin.
Addressing the conference, Minister for Social and Family Affairs Mary Hanafin acknowledged the difficulties defined benefit schemes were having in trying to address huge deficits caused by adverse stock market performance, low interest rates and increased longevity. She pointed to several measures taken in the last year to ease pressure on defined benefit funds, but said other changes would be necessary.
In the context of the recently- published Commission on Taxation report, she highlighted a recommendation to increase the retirement age - one of 14 proposals on pensions in the report.
"Certainly, an increase in retirement age is an option we must consider, and we will make any final decision in this regard as part of the entire package of pension reform to be announced in the long-term framework," she told delegates of the IAPF, whose members oversee Irish pension fund savings.
Ms Hanafin noted that a number of other countries had already moved to increase the state pension age.
IAPF director Maurice Whyms welcomed the greater flexibility introduced by the Minister in recent months. "The changes in wind-up priorities will provide for better equity between pensioners and members while still protecting those already in retirement."
He said the industry also supported the Minister's move to establish a Pensions Insolvency Payment Scheme which will reduce the cost of buying annuities in cases where an employer becomes insolvent.
However, Mr Whyms said change was still needed in relation to the Minimum Funding Standard. At present, most defined benefit pension schemes are failing to meet the standard and must present plans to the regulator, the Pensions Board, on how they plan to return to compliance.
The IAPF survey indicates that, increasingly, one measure is to phase out defined benefit cover. Other measures being adopted include increase member contributions to schemes and capping or even reducing pension increases.
