Pressure to ease funding
The Irish regulators’ new pension fund solvency requirement introduced under the Pensions Amendment Act 2002, obliges schemes to report their solvency status on an annual basis.
In its current form, the solvency test requires that if a pension scheme is underfunded, it is allowed three and a half years to return to 100% solvency – a considerably tighter timeframe, for example, than the UK’s minimum funding requirement (MFR).
There is discussion in Ireland that the Irish Pensions Board will change proceedings and give a little more latitude to funds in terms of timing.
The rumour is that pension funds could be allowed to use the current three and a half-year time frame to reach 85% fully funded and a total of 10 years to get right up to 100%. This is only speculation at the moment, however.
Under the current rules, observers point out that a significant number of the country’s pension funds could be considered to be insolvent, meaning that corporations would be obliged to pump in money to prop up the pension scheme.
The Irish Association of Pension Funds says it is lobbying hard on the issue and the Irish Pension Board is currently reviewing the situation.