Defined benefit (DB) schemes are putting their members’ benefits at risk, according to the Irish regulator.
Brendan Kennedy, chief executive of the Pensions Authority, said there are “ongoing concerns about the financial management and the investment of DB schemes".
Ireland is now joining the UK in taking action on the future of DB pension schemes.
He said: “The timing and amount of benefits to be paid may be unclear; future investment returns may be uncertain; the ongoing support of the sponsoring employer cannot always be taken for granted, and trustees will try to ensure that contributions are predictable and not excessive.”
Although investment returns have been good in recent years, “this has not been enough to keep pace with the increasing cost of providing reliable retirement income, which is the ultimate objective of retirement saving,” he said.
These comments come as Ireland's politicians have begun debating new rules to improve DB scheme protections, including a bill to make it illegal for companies to abandon DB pension schemes with deficits.
The British government is also taking action on the future of DB pension schemes.
Among the proposals considered during a government consultation in February was the creation of a DB “superfund” to provide small schemes with scale.
On scheme affordability, the paper also proposed methods to allow “stressed” DB schemes to ease their burdens, including by switching their annual pension increases from the retail price index to the consumer price index.
The discussion of member protection centred around giving The Pensions Regulator more powers, including the power to impose much more punative fines on sponsoring companies that fail to meet their obligations.
Ministers have faced calls for action on DB pensions following the BHS debacle, which saw thousands of people’s pensions under threat after the department store’s collapse.
A white paper, due to be published in the winter, will set out what action the government intends to take.
maria.espadinha@ft.com
