Dáil Éireann Debate, Thursday - 17 January 2019
66. Deputy Michael McGrath asked the Minister for Finance the average monetary value of a pension fund accumulated by workers using personal retirement savings accounts, approved retirement funds or an occupational pension fund; if the maximum limit under the investor compensation scheme is sufficient to cover these monetary values in the event of a failed investment firm or broker; and if he will make a statement on the matter. [2220/19]
Amharc ar fhreagraI am advised by the Pensions Authority (PA), a body under the aegis of the Department of Employment Affairs and Social Protection, that at the end of Q3 2018, the value of assets held in PRSA accounts stands at circa €6.6bn. The number of PRSAs established at that time was 275,739 resulting in a mean average value of PRSAs of circa €24,000. I am further advised by the PA that not all of the established PRSAs are current active contacts. Therefore, the average value of assets held within active PRSA accounts would likely increase if such accounts were excluded.
I am advised by the Revenue Commissioners that ARFs are not pension funds, per se. They are investment options into which the proceeds of certain pension arrangements can be invested on retirement. Based on a survey of Qualifying Funds Managers which Revenue conducted during 2017 and 2018, I am advised that the mean average value of ARFs was almost €187,000 and the mean average value of Approved Minimum Retirement Funds (AMRFs) managed by those fund managers was almost €58,000. I stress that these figures are from a survey rather than drawn from tax returns. I should also point out that some individuals may hold more than one ARF.
Regarding the average value of occupational pension funds, I am advised by the PA that the most accurate approximation can be made from examining annual scheme information data, based on data from 2015 Annual Scheme Information (ASI) returns, which show a total value of assets held in occupational pension schemes of circa €95.4bn and 1,267,787 scheme members.
Coverage of the Investor Compensation Scheme (ICS) is set out in the Investor Compensation Act 1998 (the Act). I refer the Deputy to my recent response to PQ 1174/19 which sets out coverage of the ICS in relation to Personal Retirement Savings Accounts (PRSA), Approved Retirement Funds (ARF), and Occupational Pension Funds.
The Deputy will recall that investment instruments which are eligible for compensation under the Act are set out in section 2 of the Investment Intermediaries Act, 1995 (IIA) and Schedule 1 Part 3 of the European Union (Markets in Financial Instruments) Regulations 2017 (MiFID).
It is apparent from the investment instruments referred to in section 2 of the IIA that PRSAs are listed and therefore in-scope, subject to all other elements of the compensation obligations being satisfied in accordance with the Act.
An ARF is not a defined investment instrument within the scope of the Act. Therefore, the compensation obligation, if any, would need to be considered, on a case-by-case basis, by an Administrator appointed in accordance with the provisions of the Act to validate any claims received from clients of the relevant failed firm.
A pension or retirement fund is defined as an "excluded investor" for the purposes of the Act and is therefore outside the scope of ICS coverage.
The ICCL does not collect product specific data from all 3,410 member firms in respect of the individual investors with whom those firms provide investment services, and that would be deemed to be eligible investors under the Act as the ICCL.
In respect of eligible clients’ investments, the compensation obligation of the ICS relates to eligible client money held, and, eligible client investment instruments held, administered and managed in connection with the provision of certain investment services, that the failed investment firm is unable to return to the eligible investor in accordance with legal and contractual conditions applicable. The compensation obligation is limited to 90% of the eligible investors’ net loss, subject to a maximum compensatable payment of €20,000 per eligible investor.
Due to the introduction in January 2018 of the new requirements for investment firms under MiFID and also to the experience of ICCL in dealing with compensation claims over a number of years, at this point in time it is considered that the maximum payment threshold applicable in Ireland is adequate.
Regarding the proposed implementation of an automatic enrolment pension system, my colleague the Minister for Employment Affairs and Social Protection, has primary responsibility in this area. However, I have been informed that the detailed evidence building and consultation processes required to deliver an automatic enrolment system is now being undertaken within an initial project planning phase. This will involve an investigation of the potential organisational models for delivery and the likely costs involved. It will also include an assessment of whether a trust-based model, under a Master Trust regime, or a contract-based model will be pursued and whether additional levels of regulation will be required. Until this work is completed and a preferred model chosen, it is not possible to confirm the specific operational structure and design characteristics of the automatic enrolment system.
