Pensions scheme proves to be envy of Europe

In an ideal world all major social and economic questions could be dealt with satisfactorily by approaching them in a logical and efficient way. In reality things are rarely worked out that simply - except perhaps in the case of pensions.

Ten years ago, under the first Pensions Act, the Pensions Board was established and given the job of promoting the security of occupational pensions. The board has 72,000 live schemes on its books with a membership of 570,000 and it is responsible for monitoring the schemes to ensure they are run in their members' best interests. But the board has been concerned with much more than regulation. Its mission has also been to promote the further development of pensions in the Republic. This is done through providing advice aimed at encouraging the wider application of adequate, secure, flexible and cost-efficient pensions.

This role in policy development, in the context of an ageing population, is one which the board takes seriously and has contributed to the shaping of a pensions system which is the envy of Europe.

Ms Anne Maher, chief executive of the board since 1996, sees its achievements as partnership in action. "In this country we made the decision to look at our structure, then we came up with proposals and now we are implementing them."

The next set of proposals will be contained in the Pensions Bill, to be published shortly by the Minister of Social, Community and Family Affairs, Mr Ahern.

One of the Bill's interesting features will be a new way for individuals to organise their pensions - through the Personal Retirement Savings Account (PRSA).

"The PRSA as we envisage it is going to be an individual investment account which will be very flexible, off the shelf and uncomplicated. It will be readily available from a wide range of retail outlets such as building societies, An Post, credit unions and even supermarkets," Ms Maher says.

"The new pension vehicle will be backed by an intensive information campaign and will be very suitable for new work practices as the individual will carry it with them from employer to employer with variable contributions if necessary."

Under the board's proposals, which are expected to be included in the Bill, employees will have mandatory access to private pensions. This means that if an employer doesn't have a pension scheme he or she will have to link up with a PRSA provider and facilitate contributions from the employees.

The Pensions Board plans to run information activities in the autumn for small firms to inform employers of the changes. Employer organisations and trade unions are already examining whether to establish PRSA schemes for their members, according to Ms Maher.

These measures are necessary Ms Maher believes because of the need to increase private pension coverage. "Until our National Pensions Policy Initiative report in 1998, there was no agreed Irish pensions policy.

"In that report we set out a blueprint for Irish pensions for the next 20 to 30 years and our main objective was, and still is, to increase coverage."

The last survey carried out in this area was in 1995 and it showed 46 per cent coverage. The Pensions Board has begun preliminary work for a 2000 survey, as required under the Programme for Prosperity and Fairness (PPF) and the findings will serve as a benchmark for the new pensions regime.

"My suspicion from the figures available is that coverage has gone down because the increase in numbers of people in employment does not seem to be reflected in pension scheme membership," she says.

If, at the end of five years significant progress has not been made in increasing coverage, the board recommends the introduction of mandatory private and occupational pensions.

Ms Maher believes the social welfare pension scheme, at 30 per cent of average industrial earnings, is good in the Republic. The board recommended to the Minister that this should increase to 34 per cent.

"To enable that to happen we recommended the setting up a National Pension Fund to get over the demographic hump. The board is pleased to see that come to pass this year," Ms Maher says.

The Irish pensions model is exceptional in Europe and very highly regarded. Ms Maher has been asked to speak about Irish pensions all over the EU, central and eastern Europe, China, the US and the UK.

"Our sensible regulatory structure, vibrant pensions industry and the good balance between state and private provision combine to make the Irish system well-developed and quite impressive," she says.

There are proposals for an EU pensions directive to go through in September and according to Ms Maher, the Irish pensions industry stands to gain from the changes contained in it.

"The directive is still in proposal stage and is bound to be watered down but one of its main components is investment freedom for pension funds. This should create great opportunities for Irish pension fund investors as they will have the advantage of expertise in international investment when other monies are freed up."

Traditionally, in many EU countries there have been restrictions on pension funds investing in equities and abroad, but these countries are now trying to develop private funds. Ms Maher says this will lead to opportunities for the Irish financial services industry.

She believes that regulation should not be costly and should add value to a pension scheme. The policy of the board in this area is compliance by co-operation but there have been problems with administrative arrears across the industry.

"We have evidence that things are not up to speed with the nine largest practitioners and we have urged them to seek extensions under the Pensions Act if they are running late. We have been given new deadlines before the end of this year for everything to be up to date.

"In this instance the trustees have been given a yellow card. If we come across more problems in our next round of auditing exercises we will be showing the red card."

The board has regular monitoring meetings with representatives of the industry and Ms Maher believes they are taking compliance more seriously now. However, 7,000 schemes hadn't been registered with the Pensions Board at all in 1999.

Ms Maher has spent all her working life in the pensions industry. "When I arrived in London in the 1960s there were two choices for Irish legal graduates, pensions or the prison service - neither seemed very attractive at the time."

There is no doubting her enthusiasm for the profession today, but apart from being a pensions specialist, Ms Maher also has another identity as a farmer. She inherited the family farm in Ballymacarbry near Clonmel and with her husband Paddy she keeps it running all year round.

"We have dairy and tillage and most of the work is contracted out but farming is so different now. It's very much dominated by EU schemes and the filling out of forms."

All the same the Mahers are devoted to the farm and travel there from their home in Dublin as much as possible. "We love it and we plan to retire back there on our pensions some day."