Tuesday, October 01 14:13:10
The ongoing pensions crisis will bite deeper in the next 12 months with a quarter of all Defined Benefit (DB) pension schemes expected to wind up.
Attendees at today's Pension Benefits Conference, hosted by the Irish Association of Pension Funds, will hear that the number of DB pension schemes has fallen dramatically from just under 1,000 DB schemes at the end of 2012, to 820 now and is expected to hit 750 at the end of 2013 - a drop of almost 25pc in just one year. Attendees at the conference, which is being sponsored by Pioneer Investments, will also learn the results of a comprehensive survey of DB pension trustees - which reinforce the seriousness of crisis.
According to Rachael Ingle, Chairman of the Irish Association of Pension Funds, "Only 8pc of funds intend to remain open to new members with 77pc having closed more than a year ago, 8pc in the last 12 months, and with a further 7pc planning to close in the near future. Just 12 months ago, 15pc planned to remain open to new members but with the pressure of the funding requirements and other factors that number has halved in just 12 month. This can be a traumatic situation for the employees whose retirement plans are being thrown into doubt - often resulting in reduced benefits. This is definitely not a time for the Government to sit back and watch. Never have employees needed the support of their Government to such an extent."
The survey also found 4 out of 5 of those schemes that close are generally replacing the DB scheme with a DC arrangement as the higher value hybrid arrangements fall out of favour because of their greater complexity.
"Over half (52pc) of respondents felt that an amendment to Priority Order would help the viability of their scheme, with only 17pc believing that it wouldn't have any effect. Most Defined Benefit pension scheme trustees are frustrated by the Government's delays in rebalancing this out-of-date rule that disproportionally favours retired members over those yet to or nearing retiring age," said Ms Ingle.
According to the IAPF, half of the schemes surveyed (49pc) feel that they can meet the minimum funding standard set out by the Pensions board. The Pensions Board's own figures show 40pc of schemes now meeting the funding standard.
Jerry Moriarty, CEO of the IAPF explained, "The survey of pension trustees mirrored the numbers emanating from the Pensions Board with full scheme wind-ups growing at an alarming pace; 10pc of funds having wound up the entire scheme with a further 14pc planning to do so in the next 12 months."
In terms of the upcoming budget, the IAPF believe that any changes should focus on minimising the impact on employment in the economy and protecting coverage and adequacy in both public and private sector pensions. The pension experts contend that this can best be achieved by not reducing tax relief for the vast majority of workers.