Pensions Board expresses concern over defined benefit schemes
Annual report for 2012 shows decrease of more than 7,000 in DB schemes
Joan Burton, Minister for Social Protection, pictured at the launch of the report with chairperson of the Board, Jane Williams (l) and chief executive Brendan Kennedy (r).
The Pensions Board continues to have concerns about defined benefit pension schemes.
Speaking at the launch of its annual report for 2012 this morning, chief executive Brendan Kennedy said the Board has concerns about “the understanding that some defined benefit trustees have of their role and responsibilities”.
“The task of trustees is to manage the scheme to ensure as far as possible that members and beneficiaries receive the benefits promised under the scheme rules. This requires trustees to understand the finances of their scheme and the risks that it faces, and to manage the scheme to mitigate these risks. This is especially important for investment risks, which are in effect borne disproportionately by the younger members of the scheme,” he said.
During 2012, there was an overall decrease in membership of 7,533 in defined benefit and 6,211 in defined contribution occupational pension schemes. As of the end of 2012, there were some 206,936 PRSA contracts, with total assets of €3.46 billion (an increase of € 430 million in assets) and an increase in contracts of 8,898 comprising of 5,361 standard PRSAs and 3,537 non-standard PRSAs.
Another issue facing DB schemes is the imminent implementation of the funding standard, with trustees required to submit a recovery plan by mid-2013.
“The objective of the funding standard is to ensure that each scheme member has a reasonable chance of receiving the benefits set out in the rules of the scheme. Without an adequate standard, there is a substantial risk that by the time that younger members retire, the scheme assets will have been exhausted in paying the benefits of those who retired before them; the longer that schemes put off meeting the standard, the greater is this risk,” Mr Kennedy said.
The work of The Pensions Board in investigating and prosecuting cases where some employers have failed to remit contributions to a pension scheme after deducting them from employees’ pay, resulted in a significant number of prosecutions and convictions. During 2012, there were 15 convictions and over €1.3 million was restored to the scheme for cases which the Board was actively investigating.
According to Mr Kennedy, the number of investigations has fallen sharply, which means that the Board will be able to devote more time to “proactive supervision” in 2013.
Looking ahead, the Board is considering a number of initiatives to discourage smaller pension schemes, and it is also looking at promoting better awareness on charges to pension scheme members, trustees and employers; improving the impact of disclosures on fees and charges and enhancing the comparability of charges on different pensions products.”