As the Deputy may be aware the objective of pension scheme investment policy is to ensure adequate assets will be available to meet the liabilities of the scheme. In order to do this efficiently, the trustees will want to achieve as high a rate of return as possible, but only if risks are kept to an acceptable level. On the other hand, the lower the target rate of return, the higher the contribution required will be. The fundamental challenge of setting the investment strategy is balancing the need for adequate returns with the ability of the scheme to tolerate risk.
The Pensions Authority has published guidelines for setting investment strategy for pension schemes. These guidelines are based on the Occupational Pension Schemes (Investment) Regulations, 2006 made under the Pensions Act 1990, as amended. Trustees are also required to check the relevant clause in their trust deed to ensure that any investment which might be planned is permissible.
The Regulations state that scheme assets must be invested in a manner designed to ensure the security, quality, liquidity, and profitability of the portfolio as a whole so far as is appropriate having regard to the nature and duration of the expected liabilities of the scheme. Furthermore the assets of the scheme must be properly diversified in such a way as to avoid excessive reliance on any particular asset, issuer or group of undertakings and so as to avoid accumulations of risk in the portfolio as a whole.
To date, neither I nor my Department have discussed relaxing the current Occupational Pension Scheme (Investment) Regulations with the Pensions Authority.
I hope this clarifies the matter for the Deputy.