Dáil Éireann Debate, Thursday - 5 March 2020
1164. Deputy Éamon Ó Cuív asked the Minister for Employment Affairs and Social Protection her plans to review the minimum funding standards for pensions to determine if they are appropriate in all circumstances particularly as they relate to retired employees of semi-State bodies; and if she will make a statement on the matter. [3327/20]
Amharc ar fhreagraPensions legislation provides for the supervision and regulation of occupational pension schemes and, in that context, requires defined benefit (DB) schemes to meet the commitments they have made to their members. The method by which this is regulated is set out in the funding standard.
The funding standard provides a benchmark against which the ‘health’ of a scheme can be tested. A scheme failing the funding standard means that, unless some action is taken, the scheme will not be able to pay the benefits promised. The existence of the funding standard itself is not the central issue in relation to whether a scheme is properly funded. Rather the responsibility rests with the employer and the trustees for ensuring that the scheme is properly funded and managed. However, the funding standard does provide the regulatory mechanism for ensuring that a scheme can provide a level of the pension benefits promised.
The funding standard is a wind-up standard, and is intended to approximate the monies needed to secure the benefits if the scheme was wound up and the accrued benefits bought out. The funding standard applies to all funded DB pension schemes. The funding standard relates to the funding position of a scheme as a whole and the scheme's ability to pay retirement benefits to all types of scheme members: deferred, active, and pensioner members. Allowing the application of different levels of funding standard to different types of scheme members or to different industries would not be consistent with the primary aim of the funding standard; to ensure that pension schemes maintain sufficient funds to pay all members their pension entitlements were the scheme to be wound up.
The Pensions Authority is the independent body responsible for regulating the funding standard. If a scheme does not meet the funding standard, a funding proposal must be submitted to the Authority in accordance with the time limits detailed in the Pensions Act.
The Pensions Authority requires that, in setting investment policy, the trustees of a DB scheme must have regard to the need to satisfy at regular intervals the minimum funding standard set down in the Pensions Act.
The Social Welfare and Pensions Act 2012 requires a DB scheme to hold additional funding in the form of a ‘risk reserve’ by 2023. The function of this ‘risk reserve’ is to provide some protection and long term stability for scheme members against future volatility in financial markets. Additionally, and in appropriate circumstances, the regulator may now approve scheme funding proposals that provide for the recovery of their schemes funding over longer periods that was previously the case.
It should be noted that the Irish funding standard is less demanding in comparison to almost all other European countries. My Department, in conjunction with the Pensions Authority, monitors the operation of the minimum funding standard for DB pension schemes.
I hope this clarifies the matter for the Deputy.
