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Pensions Regulation & Supervision in Ireland

Conference on Supervision of pension systems - current trends and issues. International experience. Warsaw, 17-19 September 2006. Pensions Regulation & Supervision in Ireland. Anne Maher Chief Executive, The Pensions Board, Ireland 18 September, 2006. Agenda. Current Irish pensions model

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Pensions Regulation & Supervision in Ireland

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  1. Conference on Supervision of pension systems - current trends and issues. International experience. Warsaw, 17-19 September 2006 Pensions Regulation & Supervision in Ireland Anne Maher Chief Executive, The Pensions Board, Ireland 18 September, 2006

  2. Agenda • Current Irish pensions model • Pension regulation and supervision in Ireland • Pensions Board role • Future direction 2

  3. Current Irish Pensions Model • First Pillar • State universal basic benefit • Second Pillar • Private voluntary supplementary benefit 3

  4. Current Irish Pensions Model First Pillar • Flat benefit • Old Age Contributory Pension of 33% average industrial earnings subject to contribution conditions • Old Age Non-Contributory Pension subject to means test for those not qualifying for contributory pension • Funded on pay-as-you-go basis supported by National Pensions Reserve Fund • Avoids poverty • Expects to provide replacement income for 30% lower paid 4

  5. Current Irish Pensions Model Second Pillar • Private • Voluntary • Funded except for Public Service • DB/DC Ratio is 2 : 1 • Occupational pension schemes, personal pensions, Personal Retirement Savings Accounts • Covers 51.5% of employed people • Aims to provide supplementary pensions for 70% higher paid • Supported by tax reliefs and pensions awareness campaign • Public Service pension: good benefits/ almost universal coverage/ pay-as-you-go supported by National Pensions Reserve Fund 5

  6. Ireland – Pension Regulation & Supervision Regulation • Introduced by Minister for Social and Family Affairs • Developed through Pensions Board advice arising from: • Experience • Consultation • EU requirements • Contained in Pensions Act, 1990 (as amended) and Regulations 6

  7. Ireland – Pension Regulation & Supervision Principles of Pension Supervision & Regulation • Maintain balance between regulation and cost • Take into account voluntary nature of private pensions • Trust-based system where trustees have primary responsibility • Information disclosure to ensure transparency and enable beneficiaries to monitor • Board promotion of pension security • Detailed regulation/light supervision • Reactive and proactive • Cooperation with trustees and advisers • Securing compliance without recourse to legal action unless necessary 7

  8. Ireland – Pension Regulation & Supervision Objectives • Ensure no monies are misappropriated • Ensure beneficiaries receive their full entitlements • Ensure monies are appropriately invested • Ensure DB schemes are appropriately funded • Ensure members are provided with enough information to make appropriate decisions 8

  9. Ireland – Pension Regulation & Supervision Supervisory Players in Ireland • The Pensions Board • The Financial Regulator • Revenue Commissioners • Pensions Ombudsman • Professionals (actuaries, auditors, administrators, custodians, investment managers) 9

  10. Pensions Board • Established in 1990 • Independent statutory body • Represents all pensions interests (Government, employers, trustees, unions, pensions industry, consumers, pensioners) • Has 3 roles (supervisory, policy advisory, pension development) • Supervisory role is: “To monitor and supervise the operation of the Pensions Act, 1990 and pensions developments generally including the activities of PRSA providers …” 10

  11. Pensions Board Regulatory Powers • Power to investigate • Power to prosecute • Power to remove trustees • Power to restore assets • Power to dispose of assets 11

  12. Pensions Board Regulatory/Supervisory Activities • Scheme registration – schemes required to register with Pensions Board • Funding Standard – requirement to submit an Actuarial Funding Certificate (AFC) at specific times • Disclosure Compliance – conduct random audits of schemes • Ongoing discussions with relevant parties (e.g. trustees, advisers, providers) • Investigations – regular or arising from “whistleblow” reports • Prosecutions 12

  13. Pensions Board Funding Standard • Applies to Defined Benefit schemes • Wind up funding standard – enough assets to meet liabilities if scheme were to wind up immediately • Compliance monitored by Pensions Board through submission of Actuarial Funding Certificates • Schemes which fail to meet standard must have funding proposal to restore funding • Funding ‘extensions’ can be given by Board for up to 10 years • More stringent requirements on extensions for ‘cross border’ schemes 13

  14. Pensions Board Issues with current system • Concern to avoid over regulation • Very complex • Over reliance on ‘disclosure of information’ • Funding issues for Defined Benefit schemes • Low level of contributions to Defined Contribution schemes 14

  15. Future Direction For supervision • Risk-based assessment • Different focus required for different types of arrangements • Requirement for Pensions Board to hold more information • More focus on pension scheme administration • Supervisory focus on entity running the scheme/arrangement • On-site and off-site supervision • More EU driven requirements? 15

  16. Future Direction For Irish pension model • Pensions recognised as major issue • Recent Pensions Board Reports to Government • National Pensions Review • Securing Retirement Income • Government to produce Green Paper on Pensions • Decision will need to be made on future pensions policy • Future regulation/supervision needs will depend on that decision 16

  17. Conclusion • Good regulation/supervision is a key ingredient in any pension system 17

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