Michael D Higgins (Galway West, Labour)
Link to this: Individually | In context

Question 132: To ask the Minister for Social and Family Affairs the assessment she has undertaken of the risk to defined benefit pension schemes of the actuarial funding standard; the discussions she has had with affected employers and employees; and if she will make a statement on the matter. [34883/08]

Joe Costello (Dublin Central, Labour)
Link to this: Individually | In context

Question 156: To ask the Minister for Social and Family Affairs her views on the claims from the pension industry that the regulatory regime is putting pressure on the sustainability of defined benefit pension schemes; and the action she will take to amend the funding standard or the rules in relation to the compulsory purchase of annuities at retirement. [34870/08]

Mary Hanafin (Dún Laoghaire, Fianna Fail)
Link to this: Individually | In context

I propose to take Questions Nos. 132 and 156 together.

The Pensions Act provides for a minimum Funding Standard which defined benefit pension schemes must meet on an ongoing basis. Generally speaking, the Standard requires that schemes maintain sufficient assets to enable them to discharge accrued liabilities in the event of a scheme winding up. Where schemes do not satisfy the Funding Standard the sponsors/trustees must submit a funding proposal to the Pensions Board to restore full funding.

In 2007, 81% of defined benefit schemes reporting to the Pensions Board passed the Funding Standard, with most of those failing the test of having a funding proposal in place to restore full funding. However, it is expected that the number of schemes failing the funding standard will increase significantly in the coming year, but the extent of the problem will not be fully apparent until schemes carry out end of scheme year actuarial assessments and report the results to the Pensions Board.

The operation of the Funding Standard is discussed in the Green Paper on pensions and any changes proposed will be announced in the context of the overall framework for pensions which the Government has indicated it will announce by the end of the year. However, given current market conditions and the difficulties these pose for schemes in trying to devise their funding proposals, I asked the Pensions Board to allow additional time for the preparation of funding proposals, as a temporary measure. This should provide schemes with sufficient time to deal with the issues in an orderly manner. In addition to this, the Pensions Board are continuing to consider the issues involved for schemes which are experiencing difficulties in returning to a fully-funded position. There is no doubt that the current situation is causing serious difficulties for defined benefit pension schemes. The Department is working with the Pensions Board and representative organisations to find ways to ease the pressure on schemes. However, in considering any amendments to the funding standard there is a very difficult balance to be struck between the long-term nature of pension savings and the need, as far as we can, to ensure the short-term security of the benefits already accrued by employees in a scheme.