Pensions Board says most plans in deficit

UP TO 80 per cent of defined benefit pension schemes were estimated to be in deficit at the end of 2009 according to the Pensions Board, which published its annual report yesterday.

Pensions Board chief executive Brendan Kennedy said much of the organisation’s work last year was as a result of the Irish and global economic crisis.

“The problems for pension savings continued last year, despite good investment returns,” he said. “The board is very concerned with the effect on defined contribution and defined benefit schemes of investment losses since 2007 and especially, the obligation on defined benefit schemes to tackle their deficits.”

At the end of 2009, there were 254,325 members in 1,192 defined benefit schemes that were subject to the funding standard, and 332,163 members in 95 public service defined benefit schemes which were exempt from the standard.

“What determines whether a pension scheme can meet its obligations is not regulation, not the funding standard, but the prudent management of that scheme by its trustees and the support of the sponsoring employer on an ongoing basis,” Mr Kennedy continued.

“It is vital that the promises made to scheme members are realistic and deliverable . . .

“The board is concerned that the investment and funding of too many defined benefit schemes are based on aggressive investment- return assumptions and do not take enough account of investment risks and downsides.

“Defined benefit scheme funding needs to be sustainable for the long term and trustees must therefore consider realistic costs, investment risks and the ability and willingness of the employer to support the scheme.”

The number of people in occupational pension schemes rose to 853,397, an increase of 4,189 members compared to 2008.

The board took three prosecutions in 2009, including two for failure to remit pension contributions that had been deducted from employees’ wages. It issued on-the-spot fines of €2,000 each to 51 trustees of 18 schemes. Sixteen of the schemes were fined for failure to submit actuarial funding certificates or submitted them late.

One fine was issued for non-payment of Pensions Board fees, while another was imposed for failure to furnish options on leaving service.

A total 169 suspected cases of deduction and non-remittance of pension contributions in the construction sector were reported to the board. It carried out nine on- site investigations during the year and was able to close 94 cases.