IRELAND - The Irish Pensions Board has issued revised guidelines for pension schemes wanting to extend recovery periods for scheme funding past 10 years.

The government acknowledged concerns over funding pressures for DB schemes in December following increased market volatility, and asked the Pensions Board to introduce more flexibility in the supervision of the funding of DB schemes. (See earlier IPE article: Ireland eases DB funding over market worries)

The Pensions Board has now published those new guidelines for pension schemes wanting to apply for an extended funding period, and has also revealed it has “taken steps to streamline the process by publishing an application form to be completed by trustees and their advisers when making applications under Section 49(3) of the Pensions Act”.

The Pensions Board had previously specified a funding period of no more than 10 years from the effective date of the Actuarial Funding Certificate (AFC) which highlighted the need for a funding proposal, apart from in exceptional cases.

However, it has now confirmed it has “adopted a policy under which it will consider granting an effective date more than 10 years after the effective date of the relevant AFC, in appropriate circumstances”.

The Pensions Board revealed when considering whether to extend an existing funding plan, or agreeing a plan of more than 10 years, it will pay particular attention to the following issues:

The extent to which a longer plan reduces the contribution rate below the level required for a 10-year proposal; The existence and quality of any enforceable guarantees from the employer; The proposed investment strategy of the fund, and the level of exposure to investment risk over the proposed funding plan, and Any exceptional circumstances setting the scheme apart from other underfunded scheme.

The Pensions Board admitted there is no single “best” investment strategy, and stressed the setting of a pension fund’s investment strategy is the responsibility of trustees, while the Board only ensures compliance with regulations.

That said, it warned investment strategy is a “relevant consideration in deciding whether or not to grant an application”, and confirmed it would look for evidence that trustees have “fully considered” the investment strategy, and the effect of potential losses on the security of member benefits.

The guidelines also stated trustees must demonstrate the proposed investment strategy is “grounded in sound risk management and investment principles”, and the Pensions Board will “have regard to” issues including the matching of liabilities with appropriate assets.

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