IAPF urges Ireland to address 'inequities' of pensions wind-ups
IRELAND - The Irish government has been urged not to abandon proposed changes to defined benefit (DB) wind-ups that would allow for a "fairer" distribution of assets among those already drawing a pension and active members.
The changes, first outlined by minister for social protection Joan Burton last October, were meant to provide for a "more equitable" outcome should a fund wind up, with the Pensions Act currently granting pensions in payment priority over any accrued benefits of active members yet to draw their income.
Burton said last year that the current state of affairs allowed for "significant inequities", with the Irish Association of Pension Funds (IAPF) calling on the government to stand by its pledge amid fears it was moving away from the commitment.
The organisation's chairman Maurice Whyms said the government's decision to abandon proposals was "extremely worrying".
"Recent indications have been that the government has now decided not to make any changes at this time," he said.
"This is extremely worrying, as it will lead to situations where current workers could lose a significant amount of pension they have built up, often at the same time as losing their job."
Most recent employment figures place the country's unemployment rate at 14.4%, with former Pensions Board chief executive and independent trustee Anne Maher telling IPE earlier this year that the resulting reduced contributions - combined with an asset drain caused by the 0.6% pensions levy - were causing significant problems for scheme funding.
Maher added at the time that the lowered funding was already causing problems.
"[It] is leaving trustees with the decision on how they pick it up," she said. "If they have a deficit, in most cases, they will have to pick it up from the members, and how do they apportion that?"
Whyms expressed concerns about the government's hesitation, saying a number of DB schemes had been waiting on the proposed change to allow for a "more equitable distribution of whatever scheme assets exist".
"If this change does not come into force, some long-service active employees who are close to retirement may, in some instances, have most of their pensions wiped out," he said.
"This could be as difficult if not more difficult an issue for the government to deal with than changing the current protection afforded to pensioners."
Attendees at yesterday's IAPF investment conference in Dublin voted overwhelmingly in favour of changes to the priority order, with 80.7% of the delegates in favour.