MandatePension Trustees Course

25 March 2009

Andrew Nugent

Assistant Head of Information Services

The Pensions Board

Established by the Pensions Act, 1990

• Main functions are set out in the Act and include– to monitor and supervise the operation of the Act and

pension developments generally

• Promoting pensions development, information and awareness is an associated support function.

• Board conducts the National Pensions Awareness Campaign (NPAC) on behalf of Government as recommended in the “Securing Retirement Income” report of the National Pensions Policy Initiative published in 1998

The Pensions Board Focus

Three key operational areas:

• Supervision, regulation and enforcement

• Policy, legal and actuarial

• Information and awareness

Company Pension Scheme (99,802 schemes with 800,398 members)(66% DB schemes and 34% DC schemes)(Fund assets approx €60 - €80 billion)

Personal Retirement Savings Accounts (PRSAs)(Over 155,000 PRSAs with asset value of €1.19 billion- Dec 2008)(88,213 employers had signed up with a PRSA provider )

Personal Pension Plans and Retirement Annuity Contracts (RACs) (In excess of 200,000 contracts – Irish Insurance Federation)

Voluntary regime for supplementary pension provision

Types of Irish Private Pensions

Regulation, Supervision and Enforcement

• Pensions Board taking tough approach for breaches of the Pensions Act

• Board recently obtained a High Court judgement against an Irish company for €186,000 in pension arrears

Board’s Powers

• Section 18 Authorisation – furnishing of information

• Section 58 Prosecution for non-remittance of deductions within 21 days

• Section 87 High Court order to have company pay ‘unpaid’ contributions to scheme

Trustees Responsibilty In broad terms, trustees’ main duties under the Act are:

• to ensure contributions are received • to ensure contributions are remitted • to invest the funds• to pay the benefits• to ensure that Funding Standard is met• to keep records and accounts • to preserve or transfer benefits• to disclose information • to ensure equal pensions treatment • to apply the resources of the scheme on wind up • to register the scheme with the Pensions Board

Key Recommendations – Trusteeship Review

To increase the standard of trustee ability, and therefore good governance!

Trustees Training Potential new means of training (e.g. e-learning)

should be explored Pension scheme administrators should be

registered and supervised

REGISTERED ADMINISTRATORS

Implements the recommendations in the Board’s Report to the Minister on Trusteeship

Report noted that third party administrators were unregulated in terms of scheme administration work undertaken on behalf of trustees

Recommended that scheme administrators should register with Board who would then have responsibility to:- audit administration service provision, and - remove registration or apply sanctions if required standards

are not met Pensions Act amended to bring administrators within its

remit in relation to certain core functions they perform

SOCIAL WELFARE AND PENSIONS ACT, 2008REGISTERED ADMINISTRATORS (RAS)

What’s Required? From 1 November 2008 trustees of every scheme (including large Trust

RACs) must appoint an RA to provide “core administration functions” Core administration functions are:

- preparation of annual reports- preparation of benefit statements- maintenance of sufficient and accurate member records to

discharge above No RA qualification specified but RA must be satisfied they are competent

and capable

SOCIAL WELFARE AND PENSIONS ACT, 2008

REGISTERED ADMINISTRATORS (RAS)

What’s required Trustee can appoint themselves as RAs if they can fulfill above

requirements 1 member schemes must appoint RA for benefit statement/

records/Eurostat information RA can apply to be registered for either or both core

administration functions and must maintain records for function for which appointed

RAs also required to provide statistical information for Eurostat- applies to RA responsible for preparation of annual report if

more than 1 RA

SOCIAL WELFARE AND PENSIONS ACT, 2008

REGISTERED ADMINISTRATORS (RAS)

Registration Process RAs must renew their registration annually no

later than 30 days before anniversary of initial registration or renewal

No fee payable on registration or renewal Registration forms available on Board’s

website together with a note of Eurostat requirements

SOCIAL WELFARE AND PENSIONS ACT, 2008REGISTERED ADMINISTRATORS (RAS)

Non - Compliance and Sanctions Offence for RAs to fail to carry out core functions within time

limits specified

- within 8 months of scheme year end for annual reports

- within 1 month prior to date of issue for benefit statements

RAs who outsource still liable Sanctions for failure to perform core functions may include:

- prosecution (not on-the-spot-fines)

- subjecting RA to conditions on renewal of its registration

- refusal to renew the registration RAs can rely on third party defence apart from outsource

arrangement

SOCIAL WELFARE AND PENSIONS ACT, 2008

REGISTERED ADMINISTRATORS (RAS)

Non-Compliance and Sanctions (cont) Sanction depends on degree of non-compliance and number of

schemes in respect of which offence has been committed RA can appeal Board’s decision to terminate or refuse to renew

registration to High Court Criminal offence to carry out core functions without registering

with the Board Trustees still retain current duties under Pensions Act to provide

Annual Reports and Benefit Statements – where they fail to do so but can show they had taken

reasonable steps to secure compliance by RA, Board will not pursue trustees

On-the-spot fines

• Introduced in Social Welfare Law Reform and Pensions Act, 2007

• Came into force September 2007• Alternative to going to court• More efficient way of addressing compliance

issues• Board gives offender 21 days to remedy the

offence and pay the appropriate fine (€2,000)

On-the-spot fines

On-the-spot fines apply to a range of lesser offences under the Pensions Act, including:

• Failure to register a scheme with the Board • Failure to provide scheme members with

appropriate information • Failure to respond to requests for information

from the Pensions Board • Employers not advising employees of pension

or PRSA deductions

Current issues for pension schemes

• Charges

• Investment Climate

• Funding

• DB/DC/Hybrid…

Changing demographics

2006 2026 2056

No’s at Work 2,000,100 2,268,000 2,125,000

Aged over 65 464,000 844,000 1,532,000

No’s at work per person over 65

4.3 2.7 1.4

Changing world we live in

We are Living Longer

More Contract Work

More mobility in careers

Changing work patterns

More Part Time Working

Single Parent Households

Smaller Families

Separation/Divorce

Recent developments

• Green Paper on Pensions published in October 2007, followed by consultation phase which is now completed

• Commission on Taxation to consider how best the tax system can encourage long term savings to meet the needs of retirement

• Pensions also a commitment in Programme for Government

• Recent social partnership agreement which includes a commitment to produce legislation on the transfer of undertakings

Further information

Pensions board website provides;

– Checklist which provides information and a questionnaire to help you inform yourself about how to provide for your retirement

– Pensions calculator allows you to estimate the amount of money needed to contribute to your pension in relation to your age yearly salary to end up with the level of pension you expect in retirement.

We all have a responsible role to play in…..

….actively promoting pensions take up !