The 2008 annual report of the 17-person strong Irish Pensions Board was today launched by the Minister for Social and Family Affairs, Mary Hanafin TD. Hanafin who is building credits for 3 public sector pensions - - as a minister, TD and teacher on 12-years leave - - emphasised the serious losses sustained by both defined benefit and defined contribution schemes in 2008. The minister effectively ruled out any hope of the Government establishing a pensions protection scheme. She said that such a scheme had proved very expensive in the UK.
The majority of Irish private sector workers have no occupational pension and a vignette from the boom period was staff from the Pensions Board, who were members of one of the world's best schemes with guaranteed benefits, encouraging lower-paid people to sign on for pension products, which subsequently plunged in value.
SEE: Finfacts Feb 18, 2009 report - - Lenihan says total cost of State pension for an Irish public sector worker hired after 2004 is 26.1% of pay
Speaking at the launch the Chief Executive of the Pensions Board, Brendan Kennedy said: “2008 was an extremely difficult year for pension savings, and the retirement plans of very many individuals have been badly affected. The falls in investment markets worldwide in 2008, which continued in early 2009, have resulted in sharp falls in the value of most defined contribution pension savings, whether occupational pensions, PRSAs or personal pensions. There has also been a significant deterioration in the solvency of defined benefit schemes where very few schemes now meet the funding standard, and a small number do not have enough assets to meet the liabilities of current pensioners.”
Although pension losses were unavoidable, the experience of 2008 was worse than it could, or should, have been. Kennedy said: “Too many schemes did not take account of the investment risks they were running in 2008. Too often it seems that schemes’ primary goal is to keep contributions to a minimum and they give little or no thought to risk.
As highlighted in previous years, the Board is concerned that the investment and funding of too many defined benefit schemes are based on aggressive investment return assumptions and do not take enough account of investment risks and downsides. Defined benefit scheme funding must be based on realistic assessments of investment returns and of life expectancy. It is not appropriate for trustees to focus solely on minimising contributions and satisfying the funding standard: a scheme needs to be sustainable for the long term, and trustees must therefore consider realistic costs, investment risks, and the ability and willingness of the employer to support the scheme.”
Following the introduction of legislatives changes in the April 2009 Social Welfare and Pensions Act, the Board extended the deadline for defined benefit schemes to submit funding proposals for approval. In order to meet these deadlines trustees and employers will have to focus, as a matter of urgency, on producing funding proposals that are both viable and sustainable over the long term.
The Board is equally concerned by how poorly defined contribution schemes have performed. Defined contribution scheme members should be provided with adequate and understandable explanations of investment choices and risks. All scheme members should take an active role in their pensions and, if they do not understand what is provided to them, they should talk to their scheme trustees or pension providers."
The Pensions Board opened 150 investigations in 2008, into construction companies, the organisation said today. At the launch of its 2008 annual report. the board highlighted the practice of some building firms deducting pension money from workers' pay packets and failing to pass it on to their retirement schemes.
Annual_Report_and Accounts_2008.pdf
