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Irish Pensions Magazine Autumn 2016
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News
Welcome to the Autumn edition of the IAPF pensions magazine. All of our
Committees are back up and running and we have held a number of events
over the last 2 months, including our recent Benefits Conference. It was good
to hear from the Minister for Social Protection, Leo Varadkar, who was able to
take time out of the pre-Budget negotiations to address the large attendance.
It was also good to hear him say that the issue of Universal Pensions will be a
priority after the Budget process has concluded.
The Pensions Authority Consultation on Pensions Reform & Simplification
closed on October 3rd and we made our submission which is available on our
website
here. We welcome the Consultation and the opportunity to contribute
to it. Some of the changes proposed have the possibility to radically alter the
make-up of the Irish pensions system, and it is important that they are given
careful consideration.
We welcome the acknowledgement of the importance of the role of lay trustees and we have strongly argued
that point since the consultation on trustee qualifications last year. They do need support and good trustees
recognise that. We aim to support trustees as much as possible to carry out their crucial role. Earlier this year
our DC Committee published templates for a DC Risk Register, Trustee Compliance Checklist and Trustee
Conflicts of Interest Log. Our Investment Committee has been publishing a series of Investment Topics to
help trustees get a better understanding of complex issues in order to help them when they discuss those
with their advisers. Our Benefits Committee has published a Wind-up Checklist for DB schemes.
We do believe that there is a need to look at harnessing the benefits of scale within the pensions system and
master trusts are a means of doing that. However we also need to ensure that good, engaged employers
and trustees are encouraged to set high standards in their own schemes. We need to ensure we don’t
redesign the system so that it would become too difficult for good schemes to exist.
It was disappointing that the Consultation didn’t focus on tax issues or the disclosure requirements. We see
both of these as requiring a lot of work if we are to properly simplify the system. We look forward to further
engagement with the Authority and the various Government Departments on this.
The other big issue exercising trustees at present is the continuing increase in the value of DB scheme
liabilities as a result of historically low interest rates. We have had a significant loss of DB schemes in the
last 10 years with the number of active schemes having fallen from just over 1,200 at the end of 2006 to less
than 500 today. The number of active members in those schemes has dropped from 270,000 to 126,000 at
the end of last year.
The schemes that survived have generally done so because of tough decisions and considerable effort and
pain for members and employers. Many employees have seen their benefits reduced, either in payment or
what they can expect to receive when they come to retire. Many employers have had to agree to significant
increases in their contributions to the scheme. So, despite reducing the schemes’ liabilities and increasing
assets (DB assets at the end of 2015 were €71.8bn compared to €39.4bn at the end of 2008), schemes are
continuing to see the value of those liabilities rising because of the link to interest rates. Interest rates
continue to remain low because of the Quantitative Easing policies of Central Banks and it is difficult to see
when and how those policies will end.
The schemes that have survived have done so because of the willingness of workers to sacrifice benefits and
the goodwill of employers to continue to sponsor the schemes. It would be a real tragedy if they were to be
forced to wind up because of the way in which we value the liabilities, rather than focusing on their ability
to pay out benefits over the next 30 or 40 years.
We believe it is time to take a wider look at DB funding and the minimum funding standard basis, and this
is an issue we will be focusing on over the coming week and months.
Jim Foley
Chairperson
Chairperson’s Message