Cantillon: No winners as Government dithers on pension reform

The minimum funding standard is the bete noire of the sector these days

Brendan McGinty, IBEC Director of IR/HR Services.

Brendan McGinty, IBEC Director of IR/HR Services.


It’s only one side of the conversation, of course, but the recurring theme of a pensions seminar hosted by employers’ group Ibec yesterday was the unreasonable approach to regulation of the sector by the Government and the Pensions Board.

Neither does themselves many favours. With 80 per cent of defined benefit pension schemes under water and companies struggling just to continue current employment levels, the regulatory threshold just keeps getting higher.

“Assets are going up [as markets recover] but the MFS [minimum funding standard] just keeps running away from us,” one speaker said yesterday.

The minimum funding standard is the bete noire of the sector these days – the rule that says all schemes must be in a position to meet their long-term pension obligations in their entirety if they were wound up today. Schemes with a deficit by this measure must file recovery plans, or “funding proposals”, with the regulator by Sunday. Industry sources say as many as 800 schemes will be in that position, including some of the largest.

And there’s no guarantee their plans will be accepted. If the regulator deems them unrealistic, it can force companies to wind up their schemes, leaving workers substantially out of pocket in retirement – not least by the Government’s repeated refusal to address the “manifestly unfair” order of who has priority claim to the assets of an underfunded scheme being wound up. Effectively, pensioners’ income is sacrosanct regardless of the size of their pension (because they have no chance to recoup losses) while everyone else has to scrap for a share of what, if anything, is left.

Despite the unprecedented common front for change being presented by employers, unions, the pensions industry and actuaries, the Government keeps long-fingering reform.

And in an even more ludicrous twist, following a recent European court ruling Ireland is now in the position where workers in a profitable company could end up with a smaller percentage of their pension benefits than colleagues in a company that has collapsed.

For those companies entering increasingly difficult conversations with employees fearful about their future there is, as one speaker noted yesterday, “no good news in any of this, except that you are saving them from worse news”.

Sign In

Forgot Password?

Sign Up

The name that will appear beside your comments.

Have an account? Sign In

Forgot Password?

Please enter your email address so we can send you a link to reset your password.

Sign In or Sign Up

Thank you

You should receive instructions for resetting your password. When you have reset your password, you can Sign In.

Hello, .

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

Thank you for registering. Please check your email to verify your account.

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.