Pension scheme members face losses

FOUR out of five defined benefit pension schemes were in deficit at the end of 2009 as investments and funding proved “too aggressive”.

This means just over 200,000 members of defined benefit schemes faced losses on their retirement nest eggs at the end of last year.

In its annual review, the Pensions Board said it is very concerned with the effect on defined contribution and defined benefit schemes of investment losses since 2007, especially defined benefit schemes’ obligation to tackle deficits.

It said it is concerned that the investment and funding of too many defined benefit schemes are based on aggressive investment return assumptions and do not take enough account of investment risks. Defined benefit scheme funding needs to be sustainable for the long term, it said, adding that trustees must consider realistic costs, investment risks and the ability and willingness of the employer to support the scheme.

At the end of 2009, there were 853,397 members in 84,226 occupational pension schemes, an increase of 4,189 on 2008. There were 169 suspected cases of deduction and non-remittance of pension contributions by employers in the construction sector reported to the board in the year.

Pensions Board chief executive Brendan Kennedy said: “Much of the work of the Pensions Board in 2009 was a direct or indirect result of the Irish and global economic crises. The problems for pension savings continued last year, despite good investment returns.

“What determines whether a pension scheme can meet its obligations is not regulation, not the funding standard, but the prudent management of that scheme by its trustees and the support of the sponsoring employer on an ongoing basis. It is vital that the promises made to scheme members are realistic and deliverable.”

The board said it is “acutely aware” of the complex industrial relations and protracted negotiations schemes are involved in while tackling deficits.

During 2009, the board issued on-the-spot fine notices of €2,000 each to 51 trustees of 18 schemes. It said 16 schemes were fined for failure to submit or late submission of actuarial funding certificates.

There was one prosecution for failure to submit an actuarial funding certificate and two prosecutions for failure to remit pension contributions deducted from employee’s wages.

There was also a 20% increase in visits to the Pensions Board website, www.pensionsboard.ie, to 601,419 last year.

The review said there were 170,862 PRSA contracts with total assets of €2.05 billion at the end of 2009, an increase of 15,230 contracts and €850 million in assets since 2008.