DB fund closure due to funding standard 'unfortunate' – Pensions Board
IRELAND – The closure of defined benefit schemes unable to pay benefits is preferable to them remaining open, the head of the Irish Pensions Board has said.
Brendan Kennedy, chief executive of the Irish regulator, also said that it was difficult for him to say why some companies and parts of the industry were hostile towards the Board, although he did recognise the "severe financial impact" the reinstatement of the minimum funding standard would have on some sponsors and funds.
Speaking with IPE almost a year after details of the new funding standard were announced, Kennedy said that "unfortunately" some pension funds would be forced to close in the wake of its reintroduction.
"On the other hand, one of our motivations throughout all this has been, a scheme that can't pay its benefits, you don't achieve anything by that scheme being open.
"Our bottom line is, will the members have a realistic chance of getting the benefits that they have been promised and, if not, something has to be done," he said.
Kennedy also addressed comments from an Irish company that the Board had "put a knife in the back" of DB funds.
"It would be very difficult for me to say why they are hostile," he said. "We do recognise and we have always recognised that for some schemes, the re-introduction of the funding standard has a very severe financial impact and a lot of people are understandably worried."
He re-stated that it was the Board's intention to ensure benefits could be paid out to members, and added: "In some cases, schemes are in such a bad position that, realistically, they are certainly not going to be able to pay the benefits that they are currently promising.
He noted that, in such instances, the "very, very difficult" process of enacting benefit reductions under Section 50 would have to go ahead.
Questioned about comments from the Pensions Board's Pat O'Sullivan that infrastructure and other bonds would soon be permissible as matching assets under the incoming risk reserve requirements, he said he could not really add anything to O'Sullivan's remarks.
"At the end of the day," he said, "this is governed by regulation and it's a matter for the government and the minister to make the regulation. If and when she makes regulatory changes, then we will all know."
However, he admitted that there had been a "very encouraging" consultation with the industry on expanding the category of matching assets beyond European Union sovereign debt, and that the Board had "engaged" with the Department of Social Protection and was "exploring the issues".
"We certainly are grateful to the industry for their input," he added.