Pensions Board to ease rules for solvency terms

Business Correspondent

This follows the 50% collapse of stock markets over the past three years.

Up to 23% of the value has been wiped of the value of Irish pension funds in 2002.

The recent collapse of IFI highlighted the difficulties of inadequate funding.

Workers are not just facing the dole, but diluted pensions due to the stock market meltdown.

News that the Pensions Board was actively looking at easing the actuarial solvency terms for this type of pension added to the fears of thousands of workers that their pension fund might be in serious difficulties.

But a spokeswoman for The Pensions Board rubbished any such suggestion.

She said: "There is no crisis in defined benefit schemes, but we want to avoid a knee jerk reaction from companies who may presently find difficulty meeting the actuarial guidelines for their schemes."

Over the next 12 months 300 of the Irish-based defined pension schemes will have to submit actuarial certificates saying their funds are solvent.

Mary Hutch, information officer with The Pensions Board said "there is no evidence of a serious crisis for Irish defined pensions, but the Board want's to ensure that firms who may be under pressure under the funding rules, will not switch their schemes to defined contributions where the employee has to make up any shortfalls in their pensions.

Under the actuarial rules funds have to be capable of meeting all of their pension fund obligations if they were to shut down.

The Board is considering a relaxation of the rules so to avoid companies switching from Defined Benefit schemes to Defined Contributions and not allowing them off the hook in terms of their defined benefit plans.

"We want to keep the defined benefit plans in place. That is the reason we are considering a relaxation of the rules in the short term, to allow the stock markets to recover and to ease the pressure on funds facing short-term difficulties", she said.

Tom Murphy, head of investment management, at Mercer, one of the top pension consultancy groups said there was no serious threat to existing pension plans in Ireland.

"In Britain pension fund rules on solvency would only give 60% of the cover required by Irish law, so a high safety net exists in the Irish situation", he said.

The Pensions Board's rules state that a scheme must be able to fund annuities for all of its members if it is wound up.

And if a fund is in deficit the company must put forward proposals explaining how it will make up the shortfall.