Written answers

Monday, 9 September 2024

Department of Employment Affairs and Social Protection

Departmental Correspondence

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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937.To ask the Minister for Employment Affairs and Social Protection if she will examine the matter raised in correspondence (details supplied); and if she will make a statement on the matter.[34181/24]

Photo of Heather HumphreysHeather Humphreys (Cavan-Monaghan, Fine Gael)
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Firstly, I hope the Deputy will appreciate that I am unable to comment or intervene in relation to issues specific to an individual pension scheme or pension provider. My Department has no role or function regarding the regulation of financial service providers, including brokers and intermediaries, which are regulated by the Central Bank of Ireland and are more appropriately addressed to my colleague, the Minister for Finance.

Where somebody feels they have been treated unfairly by a particular pensions provider, they have the option of making a complaint to the Financial Services and Pensions Ombudsman (FSPO). One of the main roles of the FSPO is to investigate, mediate and adjudicate complaints about the conduct of regulated financial service or pension providers. Investigations by the FSPO are free of charge to the consumer.

The Pensions Authority is the regulatory body charged with the supervision of pension schemes and has the necessary powers under statute to investigate the conduct of a pension scheme should it become aware that a scheme is not in compliance with the provisions of the Pensions Act. Where a pension scheme member is of the view that the scheme is not in compliance with legislative requirements he or she may make a formal complaint to the Pensions Authority.

The availability of comprehensive and transparent information on fees and charges is important and helps consumers to decide whether investments represent value for money. It is recognised that improved transparency in relation to fees and better outcomes for pension savers is always desirable.

Pension scheme trustees and administrators have responsibility for achieving good outcomes for the members and beneficiaries of their scheme. Scheme costs have an important bearing on these outcomes, and therefore trustees and administrators should know the costs that their pension scheme is incurring and be able to justify the value received for these costs.

The Deputy may be aware that in March 2021, I wrote to the Pensions Council to ask for its views on the merits of introducing an initiative similar to the Cost Transparency Initiative in the UK for pension providers in Ireland and whether such an initiative should be on a voluntary or mandatory basis. The Pensions Council July 2022 ‘Report on Cost Transparency’ recognised that mandatory disclosure may take time to achieve and recommended that any such initiative should initially operate on a voluntary basis.

In order to identify the appropriate policy responses to the measures contained in the Pensions Council report, the Pensions Authority engaged with the pensions industry on the issue of costs transparency. Arising from that engagement, the Irish Association of Pension Funds (‘IAPF’) recently announced that it is supporting and facilitating the introduction of a Cost Transparency Standard (‘CTS’) in Ireland which will enable trustees and administrators to better understand the investment costs they pay and to benchmark these costs against their peers. The Pensions Authority has committed, through its supervisory activity, to closely monitor the success of the CTS. In the longer term, in the event that the Pensions Authority is of the view that cost disclosure and comparability under the CTS are not adequate, the Pensions Authority will advise my Department of any legislative change in this area it considers may be necessary.

Of course, in addition to the CTS, there are already existing requirements imposed on scheme trustees in relation to the disclosure of information to scheme members in relation to costs as set out in –

  • the Occupational Pension Scheme (Disclosure of Information) Regulations 2006 [S.I. No. 301 of 2006] made under the Pensions Act 1990;
  • Regulations 31 to 37 of S.I. No. 128 of 2021 which requires trustees to provide members (active and deferred) with an annual Pension Benefit Statement (PBS) including information in respect of pension projections and costs incurred by the scheme.
In relation to PRSAs, standard PRSAs have predetermined charging structures. In a standard PRSA, as per Section 104 of the Pensions Act, total charges are already capped in two ways - a 5% cap on each contribution and a maximum of 1% per year on the fund value.

The 2012 Report on Pension Charges in Ireland, undertaken by the Department of Social Protection in consultation with the Pensions Authority and the Central Bank, considered the scale and variability of pension charges across different types of pension arrangements. The report stated that the most transparent product from a charges information perspective is the PRSA. Both its charging structures and rates are addressed in regulation and the information provided in relation to them in the Statement of Reasonable Projection is relatively transparent.

In relation to Automatic Enrolment (AE), as Minister, I am keenly aware of the need to keep costs in the AE system low and transparent for its participants. A core objective for AE is to provide quality assured investment services for retirement savings at low cost to AE participants. This is especially true given that a large proportion of the initial 800,000 employees in the AE target population are lower and medium income earners. The recently enacted Automatic Enrolment (AE) Retirement Savings System Act provides for the payment of fees under this Act to be prescribed by regulations. To this end, my Department is currently designing the fee structure to ensure that fees are minimised as far as possible through competitive tendering processes for the management of funds and economies of scale for the operation of the system. Accordingly, the suggestion made in the correspondence to the Deputy that an annual management charge of 0.9% will be applied to AE is incorrect - this is not a figure quoted by my Department and it would appear that the Deputy's correspondent misread the information when relying on a third party website.

I hope that this clarifies matters for the Deputy.

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