Standards 'threaten pension provision'

Pension funds have called on the Government to loosen rigorous funding standards which they say are threatening future pension provision. The comments come in the wake of figures showing that the pensions fund industry recorded a third successive year of strong growth in 2005.

The Irish Association of Pension Funds (IAPF) said the funding standard imposed by the Government regulator, the Pensions Board, "relies on snapshot assessments of worst-case scenarios rather than looking to reasonable medium and long-term probabilities".

The Pensions Board funding standard requires all defined benefit schemes - where members receive a set pension relative to final earnings - to submit certificates from the fund actuary to certify that, if the scheme was wound up, its assets would be sufficient to meet its liabilities.

If not, pension schemes are required to submit proposals to rectify the situation.

"Despite achieving returns of over 14 per cent over the last three years, falling bond yields and increased life expectancy assumptions have meant that scheme deficiencies may not be reducing when measured against the Pensions Board funding standard," said IAPF chairman Joe Byrne, adding that the problem will be even worse when the accounting implications of FRS17 are considered. "Scheme solvency should be measured against more realistic standards before the benefits they provide become unaffordable due to Government policy," he added.