Defined benefit fund rules could cost Irish firms €3bn

The funding requirements for defined benefit pension schemes introduced by the Pensions Board in June could cost Irish companies a further €3bn, said Maurice Whyms, director of insurance firm Willis Ireland.

The board brought in legislation requiring companies running defined benefit schemes to take an actuarial assessment of the fund at the end of each year and provide a timetable for when any hole will be plugged.

At a conference in Dublin yesterday, Mr Whyms said: “In view of the complexities involved in dealing with deficits, the proposed time frame for the completion of funding proposals appears particularly onerous.”

The eurozone debt crisis, the weak global economy, and the low interest rate environment all pose significant challenges for pension funds. And while asset allocation could include new forms of investment, including Irish sovereign bonds and sovereign annuities, this comes at a risk which could include the benefits of pensioners being reduced or even suspended if the bonds ever defaulted, said Mr Whyms.

NTMA deputy director of funding and debt management Anthony Linehan said: “The last few months have seen Ireland being recognised by overseas investors for the hard work it is implementing, and this is reflected both in the decline in Irish bond yields and in the sale of €4.2bn long term bonds in July at a rate of just less than 6%.”