IRELAND - Technically insolvent Irish pension funds may have to go back to their stakeholder and negotiate fresh targets for meeting funding requirements, as an increasing number of schemes have hit solvency problems on the back of market turbulence.

Paul Kenny, the Pensions Ombudsman, told IPE it has seen evidence of an increasing number of defined benefit pension schemes becoming technically insolvent in terms of funding levels since the credit crunch began to bite in August 2007.

"Defined benefit schemes are hitting solvency issues, as a result of a whole combination of things, from rising life expectancies, rising interest rates and falling asset values. The three things are rendering some schemes technically insolvent.

"It is very easy to be technically insolvent. You can make an arrangement with the Pensions Board to fix this, But this is a pretty representative problem which is across the board of schemes, in terms of size. Even funding solutions made in good faith with the Pensions Board six months ago are looking worrying," said Kenny.

Gerry Moriarty, director of policy at the IAPF, notes most pension schemes are likely to be some way from their target funding levels than they might have hoped, even with some improvements to returns in the fixed income market.

The complication for those schemes already under agreement to meeting funding levels is they will have to go back to the negotiating table with all stakeholders and try to reach new requirements.

"The difficulty is [schemes] might have to go back to renegotiate, which could be difficult if they have to talk to unions, and sponsors, and the Pensions Board to gain approval, and that takes time too," he said.

Much of the technical funding problem is also driven in part because tight regulatory restrictions on how solvency levels should be calculated, according to Moriarty, so the IAPF has presented proposals to government and regulatory authorities in the hope more flexible terms can be met.

"We are advocating a change to the way the funding standard works. It currently operates on a wind-up basis so you have to assume if it winds up, it will be paid by annuities purchased.

"But there is quite a disparity between what the market cost is and what the true cost of annuities actually is. We would argue it would be more appropriate to have some other method of calculating the funding needs," he added.

Claims concerning the funding of defined benefit schemes is just one of the issues the Irish Pensions Ombudsman is having to look at within its workload, on the back of trouble in the stockmarkets, as members of defined contribution and additional voluntary contribution (AVC) schemes are also presenting cases suggesting they cannot retire as planned because the underfunding levels of some arrangements.

Under the current legal framework, members of Irish AVC schemes could choose to take a tax-free lump sum from their plan, said Kenny, and AVCs can be commuted within revenue limits. Yet the fall in fund values means the fund has to be realised with the reduced fund value or individuals have to wait before they can retire.

Similarly, there are some DC members who were told many years ago they could take early retirement but are now being told they cannot because schemes are underfunded.

"People who were told 10 years ago they could retire early and are now reaching 50 are being told they cannot their retirement benefits. They are being told to do that, the fund has to be 100% funded for that individual, but they are only 90% funded for the entire scheme," said Kenny.

The funding issues of pensions pale in comparison, however, to the action taken this week by the High Court, which saw construction company Limestone forced to repay member contributions to its pension scheme.

The sponsor was found to have taken over €600,000 in contributions from employees over time but had failed to pay this into the pension fund, and was subsequently taken to court by the Pensions Board.

David Maloney, head of information services at the Pensions Board, noted the aim of the regulator is always to try and resolve pensions issues on a voluntary basis, but in this particular case, the sponsor of what is seen as an life annuitising defined contribution scheme - now based largely in Dubai as it has ceased work in Ireland - had failed to engage with officials in any way and repay the money to member.

The High Court this week ruled again Limestone, but Kenny described the matter as simple "theft" and told IPE he believes such cases should be settled in the criminal court, rather than as a High Court matter.

Every Irish employer has 21 days to remit their pensions contributions to their chosen pension scheme, or they face a €2,000 fine for every month they miss that deadline, as it is deemed a criminal face if they fail to meet this requirement.