IRELAND – Occupational pension provision in Ireland is at a “watershed” due to regulatory changes, according to an academic writing in an Irish banking quarterly.

“We have reached a watershed in the provision of occupational pensions in Ireland,” writes Shane Whelan of the Department of Statistics at University College Dublin, in the Irish Banking Review, which is published by the Irish Bankers’ Federation.

“Recent changes to the regulation of occupational pension funds in Ireland have demanded that defined benefit plans must demonstrate that the assets of the scheme are sufficient at all times to meet the termination liabilities of the scheme.”

“These regulations emphasise short-term mismatch risks and encourage a move to assets that most closely match the termination liabilities.”

Whelan says this “entails a move of Irish pension assets away from equities towards bonds” as bonds most closely match this liability.

“The move towards bonds can be expected to increase the long-term costs of operating defined benefit plans as, if history is a guide, bonds lag the performance of equities in the long term.

“The consequence is that regulation designed to protect pension members has actually increased the long-term costs of running these schemes, by an unquantifiable but material amount.

“Perhaps the level of guarantee now demanded is so high, and is such a financial burden on the employer, that it is unrealistic to expect companies to provide for defined pension benefits in the future.”

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