IRELAND - Ireland should establish a National Pensions Default Fund to act as a consolidator of pension pots and look to share the cost of defined contribution (DC) schemes between employers and members, the Irish Association of Pension Funds (IAPF) has urged.
In a submission to a review of DC regulation launched by the Pensions Board last year, the organisation also suggested that early drawdown of pension savings should be considered, although it stressed that the risks of a diminished pension pot should be offset through the ring-fencing of assets - potentially by limiting the drawdown to a multiple of an annual state pension payment.
The IAPF said it would welcome "an easier environment for the portability of pension benefits" and urged the regulator to establish a central database of transfer rules and regulations, acknowledging that cross-border transfers were currently "extremely complicated".
"More broadly," it added, "the IAPF would like the [Pensions Board] to consider the establishment of a National Pensions Default Fund (or other name as appropriate) to enable individuals to save for their retirement without the need for investment decision-making and have the ability to move funds from existing schemes into this fund upon leaving their place of work."
The submission said the fund's launch could be considered at the same time as the introduction of auto-enrolment, with several government ministers recently vowing to introduce soft compulsion, as well as a national pension scheme.
"The fund would be established along the lines of best practice internationally and would be protected within constitutional law from governmental raiding at times of crisis," the IAPF added, likely referencing the use of the National Pensions Reserve Fund to recapitalise Irish banks.
The organisation was also critical that the move from defined benefit (DB) to DC had shifted investment costs from scheme sponsors to members.
"Therefore, the IAPF believes the PB should be mindful that perhaps there is a balance in how charges should be applied between both employers and members of schemes," it said, adding that the issue should not be addressed with further regulation, but rather the "simplification and standardisation" of charges to improve member confidence.
The IAPF suggested that, in line with the voluntary United Nations Principles for Responsible Investment, a voluntary code for fees could be established and said it was "happy" to work with the Pensions Board to design such principles.
"We would also recommend the consideration of the possibility of some individual early drawdown of pension funds from their DC (and/or DB AVC) portfolio," the submission said, arguing that this flexibility would improve the chances of people saving into pension schemes.
It suggested that accrued assets would be ring-fenced, with the drawdown limited to an unspecified multiple of the annual state pension.
Early drawdowns had previously been debated in the Dáil, with a minister saying any such liberalisation ran counter to current pensions policy.
Additionally, the IAPF urged the regulator to consider advances made in overseas markets, such as Australia and the US, as outcomes had been improved in those territories by scheme members interacting with their pots.
"We therefore recommend," it said, "that international developments be tracked and researched to ensure we can introduce those elements and features that can help to improve the outcomes for DC savers."