Up to €30bn wiped off value of pensions

AS MUCH as €30 billion has been wiped off the value of Irish pension funds over the past year and a half, according to the Irish Association of Pension Funds (IAPF), representing the biggest losses ever recorded.

Addressing his organisation’s annual dinner last night, IAPF chairman, Patrick Burke proposed to Government a number of safety mechanisms for pension fund members, that would basically act as an examinership programme for the schemes.

“Economic conditions continue to deteriorate both locally and on a global basis, as commentators forecast that hundreds of businesses will fold over the coming 12 months, with over 125,000 private sector employees losing their jobs,” Mr Burke said last night.

“Due to the sheer magnitude of the losses suffered on asset values, and the inability of sponsoring employers to increase contributions to the levels needed to address current deficits, urgent action is required to protect the benefits of members within our pensions system.

“In this regard, and in this environment, the current legislative framework is utterly deficient,” he added.

The IAPF and the Society of Actuaries have submitted to Government a number of proposals aimed at putting in place the long-term sustainability of defined benefit schemes, protecting employees from the risk of abandonment and addressing the current weakness and inequalities in the protection of member benefits.

The proposals include a more equitable distribution of assets on wind-up of a fund and a State Pension Purchase Scheme to achieve a better economic outcome in the event of an insolvent wind-up of a fund.

Mr Burke added: “Just as it is often in the interests of the creditors, employees and shareholders of an insolvent company to protect the long-term sustainability of that business, so too the interests of scheme members, scheme sponsors and the state would be enhanced by mechanisms which reflect an examinership process for pension schemes.”

“It is our view that regulation should not try to provide absolute protection for any single constituency, but rather should set priority regulation at a socially desirable level and thereafter treat all scheme members equally,” he said.

The IAPF has welcomed the Government’s decision to expand the administrative provisions for the Funding Standard, but said yesterday that “on the legislative front, much more remains to be done from the critical perspective of protecting members and the sustainability of defined benefit provision in the private sector”.