Minister says pension holders may be allowed to defer buying annuity

THE DEPARTMENT of Finance is "very sympathetic" towards people who are retiring shortly on defined contribution pension schemes and is considering allowing people to defer the purchase of an annuity, Minister for Social and Family Affairs Mary Hanafin said yesterday.

Referring to the poor performance of Irish pension funds this year, Ms Hanafin said there should be ample time for many people in defined contribution schemes to recover their losses, but it was a major issue for people who are retiring now or who are close to retirement.

Earlier this year, the Irish Association of Pension Funds called on the department to allow members of defined contribution schemes to defer the purchase of their annuity until markets recover.

At present, members of such schemes are forced to buy an annuity when they retire, exposing them to the current market turbulence.

Ms Hanafin also called on pension fund managers and financial advisers to reconsider their investment strategies.

"If there was one lesson in relation to defined contribution schemes we should take from the current difficulties, it is that we must take a more conservative approach to pension investment, particularly for older workers in the last 10 years before they retire," she said.

Ms Hanafin was speaking at the publication of the Office of the Pensions Ombudsman's Annual Report and Digest of Cases for 2007, at which Pensions Ombudsman Paul Kenny revealed that the number of new cases opened in the year to the end of October 2008 was up by 49 per cent on the corresponding period last year. This was partially due to an upsurge in cases relating to the construction sector, as well as an increase in complaints about general investment matters.

Mr Kenny, whose job is to investigate complaints of financial loss due to maladministration and disputes in relation to pension schemes, said that with redundancies on the rise in construction, more people were examining their pension benefits and discovering that they may not have received all the contributions they were entitled to.

He also said that, with equity markets in turmoil, pension fund holders were complaining that instructions which they may have given their administrators with regard to selling out of equities were not adhered to.

Looking ahead, Mr Kenny said: "There is every indication that our workload in 2009 will be heavier again."