Nine underfunded Irish defined benefit (DB) schemes have yet to submit funding proposals to the Pensions Authority, more than two and a half years after initial submissions were due.
Brendan Kennedy, head of the Irish regulator, said the Authority planned to resolve the situation before the end of 2016 and stressed that the funds in question were small.
“Some of those schemes have very, very specific issues and, at least in one case, are probably not capable of resolution,” he told IPE.
“We may [have] to force the scheme to wind up.”
Kennedy said it was important for the regulator to see that all avenues were explored before using its powers to force a fund to wind up, a situation that would trigger benefit reductions where a deficit has not been addressed.
“But at the same time,” he added, “while we are reluctant to use the powers, we have to recognise our legislature has given those powers to us with the view to be potentially used.
“Like any regulator, we have to strike a balance between using them sparingly but recognising they do exist and have a purpose.”
The nine funds account for only a small fraction of the approximately 700 DB funds remaining in Ireland, managing €60bn in assets.
The Authority has long struggled with overdue funding proposals.
The initial June 2013 deadline for funding proposals, which followed the reinstatement of the funding standard in the wake of Ireland’s banking bailout, was missed by more than 70% of affected funds.
The number had fallen to approximately 60 a year later, when the Authority warned it would deal with “persistent non-compliance” by schemes, but, as of February 2015, 30 funds still had yet to agree final funding plans.
Kennedy noted the formal processes that needed to be adhered to ahead of a fund’s being wound up or reducing benefits, but he said the Authority was “certainly confident” the situation with the nine funds would be resolved later this year.
Funding requirements became more onerous at the beginning of 2016, with the introduction of a risk reserve equivalent to 10% of fund liabilities.
However, funds are able to offset the requirement by investing in certain government and supranational bonds.