Brendan Griffin (Kerry South, Fine Gael)
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To ask the Minister for Social Protection her views on a matter regarding defined benefit pension schemes (details supplied); and if she will make a statement on the matter. [43624/12]

Joan Burton (Dublin West, Labour)
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I am very aware of the serious funding challenge facing pension schemes. It is acknowledged that the fundamental problem is that pensions are significantly more expensive due to increasing life expectancy and lower than expected investment returns which are reflected in increased annuity rates.

The Pensions Regulator suspended the Funding Standard four years ago, following the downturn in the financial market, to give trustees/employers an opportunity to assess the impact on pension funds and to enable them time to develop responses to the challenge. The re-introduction of the Funding Standard was delayed on a number of occasions pending changes to legislation which were designed to help trustees respond to the funding challenges facing pension schemes. Among the measures introduced at that time was provision for Sovereign Annuities. Sovereign Annuity products are now available and it is expected that the range of products will grow over the coming months.

The Funding Standard provides a benchmark against which the “health” of a scheme can be tested. 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 live up to the “promised” level of pension benefits.

The requirement for a risk reserve is also being introduced from 2016, to provide a level of protection for scheme members against future volatility in financial markets. It is accepted that the requirement for a risk reserve presents an added challenge for schemes, however, guidance issued by the regulator identifies options which the scheme can consider in meeting this requirement by 2023. This guidance is being kept under review.

Reference has been made to the easing of the solvency regime in a number of other countries. It should be noted that the solvency regime even after those changes is still more onerous that the current Irish regime. It should be noted that the changes to the Funding Standard are being implemented over the next 11 years, not immediately. This is the longest recovery period generally allowed in any European country.

The Pensions Board recently announced that the timeframe for pension schemes to submit funding proposals has been extended to 30 June 2013. This extension will give schemes additional time to help them address the issues they are facing.

Overall, the changes made to defined benefit schemes are intended to lessen schemes’ exposure to risks and bring increased stability for pension scheme members so that they receive the pension promises in the future.