IRELAND - Business group IBEC has called on the Irish government to review "draconian" rules on minimum funding for defined benefit (DB) pension schemes.

IBEC said the survival of many schemes was at stake given the minimum funding standard set by the Pensions Board.

Due to "extremely volatile market conditions", the government should lower the minimum to give companies the "necessary flexibility to make the best long-term investment decisions". 

Brendan McGinty, director at IBEC, said: "Many private sector defined benefit pension schemes are facing a November deadline from the Pensions Board to submit proposals on how they plan to address scheme deficits.

"However, companies are concerned they are being forced to make investment decisions that will meet the draconian minimum funding standard in the short term, but will negatively impact the long-term viability of these schemes."

He pointed out that the Pensions Board currently required pensioner liabilities to be measured against market annuity costs.

Lower bond yields, however, have meant annuity costs have increased by approximately 15% so far this year.

"This has increased funding standard liabilities and the level of deficit that needs to be funded, as well as impacted the assumed level of future investment return," McGinty said.

He said one solution would be to revise the minimum funding standard, which "does not reflect the current economic reality" and is "hastening the demise" of otherwise viable schemes.

He added: "If the Pensions Board does not adopt a more moderated approach to solvency, it will deprive workers and pensioners of promised benefits."