Business for Ireland’s pensions consultancies is as robust as ever, with players reporting no shortage of new work. As Ireland’s pension funds face up to their solvency issues, executives are still turning to the independent experts for help.
“The business is looking fairly good,” says Joe Byrne of Coyle Hamilton in Dublin. “There is a lot happening at the moment. About two-thirds of pension funds have solvency problems so there is a lot of work to be done.” Particularly for defined benefit (DB) plans there are funding proposals to be worked through and funding plans which must be put into effect.
Kieran Barry, executive director of Hewitt & Becketts, says the Irish consultancy market is very strong, particularly in the areas of actuarial and benefits work. It is similar to the UK, he says, though maybe not as developed.
Byrne says there is a lot of demand for work in the area of risk control, asset liability profiling, as well as requests for help with pensions governance.
“Some DB schemes are winding up and people are looking at controlling their liabilities going forward,” he says. In some cases, consultants are being called in to help set up new defined contribution (DC) schemes.
Byrne says there is a greater need for consultancy work because of the predicament people find themselves in. In an era when funds are performing very well, many of the problems that are now being encountered do not even arise. There is now a much tighter supervision regime, and this creates more work for consultants. “There is annual reporting on schemes and additional compliance work,” he says.
Tom Geraghty at Mercer in Dublin says that certainly over the last two years there has been solid demand for consultancy work. “There is more and more investment strategy work with clients, obviously because of the funding situation arising from the recent past,” he says. Funds have been carrying out in-depth strategy reviews and that has been keeping staff at the consultancy busy, he says.
On the back of these reviews, there has been manager selection work to carry out. It is noticeable that many clients are now looking increasingly at international managers and specialists, says Geraghty.
One might expect trustees at pension funds to become excessively conservative in their investment approach following the market difficulties and FRS17. But this is not the case. “We still find a healthy outlook on the part of the trustees,” says Geraghty. “They are very much looking at the long-term goal.”
Some of Mercer’s clients have made some very deliberate shifts in asset allocation as a result of FRS17, but on the whole, there has not been a particularly noticeable trend.
DB schemes are alive and well in Ireland, and the country has not witnessed the trend seen in the UK of sponsors to close their DB schemes – at least not to the same degree. “There have been some, but this has been the exception rather than the rule,” says Geraghty.
But Byrne says that in other areas of the pensions consultancy business, there could be a certain slowdown. “People are probably pulling back a little on their HR spends because of the economic situation,” he says. “Some of the discretionary spend on projects will not be flowing as freely.” However, this would not affect Coyle Hamilton’s core business areas, he points out.
“Clients are looking for added value,” says Barry. There is no doubt that pensions clients have become more discerning in terms of the service they expect, he adds.
Company pension plans and other employee benefits are seen as a key part of a corporation’s success strategy. “There is a bit of a scramble for quality labour in Ireland, and as such the benefits on offer are very important,” says Barry. So ultimately, those consultants who are able to contribute to the delivery of meaningful benefits are the ones that will attract and keep the clients.
Mercer remains the largest player in the Irish pensions consultancy market. It is reckoned to have around two-thirds of total business. Though the relative positions of the various players are fairly stable, Byrne sees Mercer’s slice thinning somewhat in the future because of inevitable developments resulting from conflicts of interest, for example.
“There has been a lot of consolidation in the last few years in the Irish market,” says Barry. The principle players are now Mercer, then Hewitt & Becketts and Coyle Hamilton, followed by Watson Wyatt and Aon.
Barry says it is important that any consultancy spreads geographically and also across the four business areas of actuarial work, administration and delivery, benefits and investment.