Irish Regulator Recovery Plan Extension Will Not Make A Difference For Significant Number of Employers
04 October 2012 (PLANSPONSOREurope.com) – The Irish pensions regulator’s deadline extension for schemes in deficit to submit recovery plans will not prevent a significant number of defined benefit closures, sponsors warn.
The Irish Pensions Board initially demanded new plans from schemes by the end of the year, but has upped the deadline to 30 June 2013.
But according to the Irish Business and Employers’ Confederation (IBEC) – which last month announced it will close its own DB scheme in response the regulator’s demands – the move will make little difference to beleaguered pension funds.
Loughlin Deegan, senior adviser for employment rights and pensions, told PLANSPONSOR Europe: “There is a fairly clear indication that many won’t be able to keep their DB schemes open given the pricing of liabilities.
“As it stands you still have all the same members and you’re paying out the same amount you did a few years ago but your liabilities have skyrocketed and so the red side of the page has gone through the roof.
“I think there will be a significant number of companies that simply cannot make initial contributions.”
Deegan added, while employers are unlikely to make their intentions known about whether they will close their defined benefit schemes until near to the 30 June deadline, he cannot see a way back for a number of schemes.
“In the Pension Board’s annual report, it gives an indication of not just the pension schemes that are in deficit but how badly they are in deficit, it is something like 50% of schemes are between 50% and 80% funded – that it is to say they are more than 20% underfunded and in terrible trouble,” he said.
And according to Deegan the regulator’s hypothetical question for the recovery plans – ‘if you had to buy an annuity for every single member of your scheme tomorrow could you do it?’ – is the wrong one to be asking.
“It was fine when times were different and annuity prices were reasonable but given the exposure of prices it is the wrong question to ask,” he claimed.