Pension scheme membership shows 6% increase

Pension scheme membership rose by 6 per cent last year, with the number of schemes increasing by 10 per cent, according to the Pensions Board's annual report for 2002.

The board also confirmed that private sector membership of defined contribution (DC) pension schemes has exceeded that of traditional defined benefit (DB) schemes for the first time.

The former usually give people a lower pension than defined benefit schemes, which guarantee employees a proportion of their final salary for each year of service. Under defined contribution schemes, benefit depends on stock market investment performance, shifting the risk from the company to the employee.

There are two people in DB schemes for every one person in a DC scheme. But fewer than half private sector pension scheme members - 49.4 per cent - are members of DC schemes.

Ms Anne Maher, chief executive of the Pensions Board, said 70 per cent of defined benefit schemes remained open to new members. "This represents a healthier situation than, for instance, in the UK where the majority of defined benefit schemes are now closed to new entrants."

Ms Maher admitted it was a concern that Ireland might head in the same direction as the UK, where 72 per cent of DB schemes are closed to new members.

Some 52 new DB schemes registered in 2002. But 107 were wound up, frozen or switched to a defined contribution model.

The stringent funding standard for DB schemes is currently being reviewed to prevent further closures.

The board will also decide whether or not to introduce a compensation scheme for members of wound-up schemes.

So far this year, the Pensions Board has received 17 "whistleblower" reports on schemes where companies in financial difficulty failed to remit contributions.

Just 15 reports were received during the whole of 2002.

Ms Maher said the increase in reports reflected the pressure pension schemes were under following equity market losses.

Despite the challenging market, some 12,145 new pension schemes were set up in 2002, taking the number of schemes to over 107,700.

These schemes have an active membership of over 709,000. Further increases are expected by the end of 2003 and will be prompted by legislation requiring employers to give employees with more than six months' service access to a pension scheme or a Personal Retirement Savings Account (PRSA) by September 15th, 2003.

Ms Maher said the board was "taking note" of suggestions on how the recently introduced PRSAs might be improved.

Responding to fears that public take-up of the new pensions will be low, Ms Maher said the environment for launching PRSAs had not been perfect, but that September 15th would be the key date in their progress.