Pensions Regulation

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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

• Anne Maher
• Chief Executive, The Pensions Board, Ireland
• 18 September, 2006

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Agenda

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

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Current Irish Pensions Model

• First Pillar
• State universal basic benefit
• Second Pillar
• Private voluntary supplementary benefit

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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

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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

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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

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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

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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

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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)

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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

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Pensions Board

• Regulatory Powers
• Power to investigate
• Power to prosecute
• Power to remove trustees
• Power to restore assets
• Power to dispose of assets

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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

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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

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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

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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?

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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

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Conclusion

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

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