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Pension Provisions.

Dáil Éireann Debate, Tuesday - 6 April 2004

Tuesday, 6 April 2004

Questions (307)

Richard Bruton

Question:

398 Mr. R. Bruton asked the Minister for Social and Family Affairs the number of defined benefit schemes that fall short of the minimum funding standard under the Pensions Act 1990; the proportion that it represents of all schemes that have been examined; and the implications and advice that she can offer to members of pension schemes that fall short of the minimum standard. [10604/04]

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Written answers

The minimum funding standard that applies to defined benefit occupational pension schemes under the Pensions Act 1990 is a wind-up standard. It is designed to ensure that there are sufficient assets to meet the liabilities. The standard has served pension members well since 1990. Over the past couple of years it has come under considerable strain and there are differing views on its appropriateness in current circumstances. One view is that a wind-up standard is not appropriate for pensions because the vast majority of them do not wind-up. They require long-term investment strategies. Others take the view that the only way to achieve security of members' benefits is to have a wind-up standard.

There is tension between the desire to ensure the security of members' benefits in the event of a wind-up and the need to ensure that employers, who have voluntarily set up occupational pension schemes, are not penalised in the short-term when they can in fact meet their long-term liabilities. The Pensions Board is reviewing the funding standard in the light of experiences here and abroad over the past number of years. It will report to me later this year. I facilitated some flexibility being introduced to ease employers' burdens in the short-term pending the overall review.

The Pensions Board is the statutory regulator of occupational pensions and monitors compliance with the funding standard. The board gave me the following data. During the 12 month period 1 April 2003 to 31 March 2004, 444 actuarial funding certificates were submitted to the board by the trustees of defined benefit occupational pension schemes. Of these 98 AFCs, or 22%, certified that the schemes in question did not satisfy the funding standard requirements of the Act.

Of these 98 schemes 68 have been examined and finalised by the board as follows: 54 funding proposals are designed to ensure the scheme can return to full funding within 3.5 years; and the remaining 14 funding proposals have, in accordance with the legislation I introduced in 2003 to allow greater flexibility, a later date specified for a return to full funding. The board is examining the submission of funding proposals in respect of the remaining schemes.

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