In the wake of the Irish Finance bill, currently under discussion in the Irish senate, delegates at the recent Irish Association of Pension Funds Conference in Dublin this year were warned again that they could be facing a misselling scandal if the industry’s comments were not taken fully into account.
Paul O’Faherty, chairman of the IAPF spoke on the limitations of the bill, and signalled the current situation left much to be desired. “Unfortunately, none of the concerns that were voiced at the time have been taken into account,” he said, referring to the “unseemly haste” at which the bill had been rushed through.
On the proposed Approved Retirement Fund, he feared that the name would be misleading and could result in a pensions crisis similar to that in the UK. “For the general public, ‘approved’ has other connotations and I think it is regrettable that this word has been used,” he said, and warned that without proper guidelines and legislation it had huge mis-selling potential. “Unless we regulate this properly we have the capability for the same disaster to happen here.” Mocking last May’s ‘Securing retirement income’ report, O’Faherty said: “It is ironic that it was called ‘Securing retirement income’ as securing income isn’t what has happened here,” adding, “If we are all going forward, we need to do it in a sensible way.”
His overall conclusion was that the Finance bill was too “populist” and suggested that possible amendments which should be included were a closer analysis of investment risks and volatility in the pension fund portfolios, the durability of funds, asset dissipation and the protection of “ordinary” pensioners. “We are basically at the start of a story here,” he says, “But there needs to be a debate going forward.”
However, Simon Martin of Aon Consulting, in the UK, gave stark advice to industry delegates. “Don’t go our way,” he said, pointing out that while regulation was needed, over regulating would lead to a breakdown in the system. He referred to the current proposals on UK regulation for stakeholder pensions as “fiendishly complicated” adding: “No-one in their right minds would recommend one.”
The UK supplementary pensions market was in fact highlighted as a model of “how not to do it” with specific reference to stakeholder pensions, as Martin launched a direct attack on the proposals as not viable in their current form.
The fee structure only served to defeat any hope of competition as in Martin’s opinion it has been set too low at a 1% minimum, leaving little room for other providers to offer cheaper deals. He called the suggestion that employers should also double up as advisers to their employees who do not want to join the company scheme as “crazy”. He said: “They have enough on their plates already.”
Jimmy Joyce, chairman of the Telecom Eireann pension plan, confirmed that belief and added that for many trustees putting prudent investing into action “can seem pretty intimidating”. “I do feel that trustees need to be quite aggressive in accounting the terms of management of their fund,” he said.
On the subject of beauty parades, he brought the subject of an overfocus on past performance into question and queried its relevance in winning pension fund business and pointed out that performance measurement surveys to date have left much to be desired from the trustee point of view. “I think trustees deserve to expect more from performance surveys than they are getting. More useful would be some guide as to how reasonable the moves the managers were making at the time.”
The question of ethical investing proved it is provoking discussion from the industry. Telecom Eireann’s Joyce put forward a case for not investing ethically, commented: “We have always been pretty slow to place restrictions on investment managers as it is also used as an excuse later on for any deficiencies shown in their performance.”
However Martin, of Aon, attacked this attitude which he hinted was common among trustees and suggested pension funds should pay more attention to who they serve at the end of the day. “There are a group of people in this debate that we have forgotten - with respect to Jimmy (Joyce), trustees often forget their members.”
He pointed out that it is difficult enough to encourage members to join pension fund schemes, and the ethical “twist” could act as a good “spark” to get them interested in signing up. “I think members are interested and if members are interested the onus is upon us to do something about it,” he added.

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