IRELAND - The Irish Association of Pension Funds (IAPF) has today branded plans by the Irish government to guarantee pension liabilities of a number of semi-state bodies as short-sighted.
The new proposals would see the government assume the assets and liabilities of a number of already pre-funded pension schemes of semi-state bodies, by placing the assets in Exchequer returns and paying the liabilities on a pay-as-you-go (PAYG) basis.
Patrick Burke, IAPF chairman, today called for a debate on the government's proposals, warning if the change were ever to be related to the urgent issues for the government, this would be "very concerning".
"To use pensions policy as an opportunity to shift your budget difficulties to today's taxpayer is not very fair to future generations and threatens the sustainability of the system."
He added: "We are worried that the discipline which previously applied to valuing liabilities - that the funds accrued or paying for the liabilities as they accrued - will be lost, because there will be no pre-funding of the liabilities."
Current regulation largely exempts pension schemes of non-commercial state bodies and some commercial semi-state bodies from the national funding standards which apply to the private sector, because there is a state commitment to meet any shortfall that might occur.
A large number of agencies have been established since the last exemption list was published in a statutory instrument in 1993, and this list has now been updated.
However, according to Burke, there is a conflict between this exemption and the current EU directive on Institutions for Occupational Retirement Provision (IORP), which requires every scheme that is not covered by national funding standards to be subject to some form of state guarantee.
"The state's position is that they are not providing any guarantees for these schemes, which is fair and proper, but at the same time, because of the IORP directive, the state had to deal with that conflict," said Burke.
The state is subsequently looking at assuming all of the assets and liabilities of the pension funds concerned and paying the future liabilities on a PAYG basis going forward.
"Unfortunately, this makes it an obvious necessity for these bodies to address the cost of pensions, and it is transferring the responsibility for those costs away from the current generation of employees and employers to the future generation of taxpayer, because it can no longer be funded from the employers and the employees' contributions. It will now have to be paid from tax revenues, and therefore the private and the public sector will share the cost of public sector pensions that were previously being funded," said Burke.
He said the IAPF is now in discussions with the department of social and family affairs and with the department of finance over this matter.
The department of social and family affairs has also commented in a written statement: "The relevant departments will enter into discussions to consider proposals to take over the assets and liabilities of these schemes."
The deparment added if agreement is reached the government will then need to consider legislative change.
That said, the deparment confirmed the schemes, following government decisions, have already been granted temporary state status on the new regulations pending the outcome of the discussions.
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