IRELAND - Around 80% of Irish defined benefit (DB) schemes were in deficit at the end of 2009, according to estimates from the Pensions Board. However “very few” schemes have requested approval for extended funding periods or benefit reductions.

In its Annual Review of 2009, published ahead of its full report later this year, the Pensions Board revealed the number of members in occupational schemes rose by 4,189 members last year, to a total of 853,397 across more than 84,000 schemes. At the same time, however, the number of pension schemes in existence reduced by 7,640.

The majority of occupational schemes in 2009 were defined contribution (DC) plans, totalling 82,939. However, most members were in DB schemes, with 254,000 members in 1,192 DB schemes subject to the funding standard, and a further 332,000 members in the 95 DB schemes excluded from the funding standard.

The Board estimated that at the end of 2009 around 80% of DB schemes were in deficit, many of them still with “substantial deficits”.

However Kennedy warned: “What determines whether a pension scheme can meet its obligations is not regulation, not the funding standard, but the prudent management of that scheme by its trustees and the support of the sponsoring employer on an ongoing basis. It is vital that the promises made to scheme members are realistic and deliverable.”

The Board also highlighted that because of extensions to submission deadlines it had received “very few applications for extended funding periods or benefit reductions” under the Social Welfare and Pensions Act 2009. However it noted it expects “there will be a significant number of applications in 2010”.

Kennedy said: “As highlighted in previous years, the Board is concerned that the investment and funding of too many DB schemes is based on aggressive investment return assumptions and do not take enough account of investment risks and downsides. DB scheme funding needs to be sustainable for the long-term, and trustees must therefore consider realistic costs, investment risks, and the ability and willingness of the employer to support the scheme.”

The value of assets held in PRSA contracts meanwhile increased by €850m over the year to €2.05bn, as the number of contracts rose to more than 170,862. The number of employers with a designated PRSA provider increased to almost 90,000, while 194 registered administrators were listed on the Board’s official register, a drop of 18 following the first renewal date in October 2009.

However, figures from the annual review also showed the Pensions Board issued on-the-spot fines of €2,000 to 51 trustees of 18 schemes. These fines included 16 schemes which were penalised for failing to submit, or making a late submission, of actuarial funding statements.

Exercise of its powers elsewhere included the prosecution of three companies, two of which related to a failure to pass on pension deductions to a scheme. Over the year, the Pensions Board received 169 new reports of suspected cases of deduction and non-remittance of pension contributions in the construction industry, to bring the total to 350.

Of these, the Board conducted nine on-site investigations and closed 94 cases, which resulted in restored pension contributions valued at €4.29m.

Brendan Kennedy, chief executive of the Pensions Board, said: “Much of the work of the Pensions Board in 2009 was a direct or indirect result of the Irish and global economic crisis. The problems for pension savings continued last year, despite good investment returns. The board is very concerned with the effect on DC and DB schemes of investment losses since 2007, and especially the obligation on DB schemes to tackle their deficits.”

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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