Firms told shut defined benefit schemes
Financial services comp-any IFG made the call after 80% of all defined benefit schemes (DB) here submitted recovery plans to the Pensions Board by the Jun 30 deadline.
The company’s director of corporate pensions, Fionán O’Sullivan, said employers will have no choice but to move their DB schemes to schemes, as the latter put greater onus on the individual to become more active in the management of saving for their retirement.
About 200,000 people belong to DB schemes. In the past, they would have been popular with employees as they placed the burden of funding the pension on the shoulders of the employer. However, nearly 65,000 workers have been affected by the cessation of more than 400 DB schemes since 2008, and many more are on the verge of collapse.
Employers, unions, and key players in the pensions industry believe many of the schemes covering 30,000 active workers which did not submit plans to the Pensions Board by last month’s deadline are either in — or about to be in — wind-up.
Employers’ body Ibec, trade union umbrella body ICTU, the Irish Association of Pension Funds, and the Society of Actuaries in Ireland yesterday warned the Government that it cannot ignore the crisis facing the pensions of thousands of workers.
“If the Government is not going to take practical measures to slow the rate of scheme closures, it should at least take immediate action to ease the worst effects of these closures,” they said.
The groups said recent changes to the funding standard rules, while they may be justifiable over the medium to long term, have exacerbated the situation for many schemes by requiring employers to increase the pace of funding for benefits at a time when, for many, they can least afford it.
“In the absence of clarity regarding the legislative environment, including how the Government will respond to the European Court of Justice ruling relating to former Waterford Crystal employees, many defined benefit pension schemes will start to unravel in an inequitable and disorderly way, at a time when it is more expensive than ever to secure pension benefits,” they said. “This will, in turn, only add to the pensions bill facing the State. We recognise that the Government now awaits a High Court decision on the Waterford Crystal case. However, the ECJ judgement has implications beyond that case, and the sooner Government signals its intentions in this regard, the better for all concerned, including the State.”
The group also called for action on the prioritisation give to existing pensioners under current wind-up rules.
The four organisations pointed to recent high profile cases where active members had lost between 40% and 70% of their expectations in order to protect the existing pensioners.
