THE trustees of the pensions of tens of thousands of workers have just weeks to address the deficits in the schemes or face prosecution by the Pensions Board.
There are approximately 1,212 defined benefit (DB) pension schemes being operated in employments for 254,325 members around the country and, of those, anywhere between half and three quarters are estimated to be in deficit.
Many DB schemes have a high exposure to equity investment making them ill-equipped to withstand the pressure imposed upon them by the global economic downturn. Furthermore schemes are having to deal with the sizeable increase in the life-expectancy of their members and the inherent pressure on the scheme which extra years create.
For the past two years the Pensions Board has given the operators of the schemes leeway to put measures in place to address their deficits. Extensions have been granted for the trustees to establish funding proposals or make section 50 applications. The latter is an application to reduce the benefits to members of the scheme. However, the Pensions Board is insisting there can be no more extensions and trustees must produce documentation required.
The schemes in question have a number of deadline dates by which time they must make their submissions to the board. The first deadline is November 30.
“It is critical that scheme trustees, in conjunction with employers and advisers, as appropriate, take steps to meet the minimum funding standard under the Pensions Act 1990 as amended, either by eliminating the deficit or by submitting the appropriate applications (eg, a funding proposal under section 49(3) and/or application for a direction to the trustees to reduce benefits under section 50 of the act) on or before the deadline for their scheme,” the board said.
“In the event of schemes not submitting such applications by the deadline, the board will be obliged to consider using its statutory powers to ensure that schemes comply with the requirements of the act.”
Under those statutory powers through section 50, the board can unilaterally direct the scheme trustees to reduce benefits and/or to prosecute trustees to the tune of €2,000 for failing to submit a funding proposal.
“While the precise course of action will be considered on a case-by-case basis, it is important to emphasise that schemes must take the necessary measures to address their deficits, failing which the board will take such action as it deems appropriate,” it said.
It is believed, if there is substantial evidence of individual schemes being close to completing proposals, small extensions might be granted in exceptional circumstances.
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