FIRST CONTRACTUAL SAVINGS CONFERENCE : SUPERVISORY AND REGULATORY ISSUES IN PRIVATE PENSIONS AND LIFE INSURANCE SUPERVISORY AND REGULATORY PRACTICES IN IRELAND 29 April 2002 Washington DC Mary Hutch, Head of Information and Training

1 PRESENTATION COVERS:  Background  Principles of Pension Regulation  Pensions Regulatory Legislation  The Pensions Board  How the Pensions Board Implements Regulation  Legal Powers of Pensions Board  How Pension Regulation is Developed  Current and Future Issues  Conclusions

2 BACKGROUND  First Pillar provides universal basic flat rate amounting to 31% of average industrial earnings  86, 348 occupational pension schemes and  Funded occupational pension schemes and funded personal pension plans – all on voluntary basis  ‘Pay–as–you–go’ for public service employees  Supplementary coverage amounts to 46% of the workforce – 52% employed and 27% of self-employed  Occupational schemes set up as trusts – personal pensions are contract based  Occupational and personal pensions are encouraged by tax reliefs on Exempt/ Exempt/ Taxed base.

3 PRINCIPLES OF PENSION REGULATION  Main principle – maintain balance between necessary regulation and excessive cost  System operates on basis of comparatively detailed regulation and light supervision  All regulation should “add value” from point of view of member protection  Take account of voluntary nature of plans  Consistency of regulation between different types of plans is important  Trust system and trustees is major component

4 PRINCIPLES OF PENSION REGULATION  Strong emphasis on disclosure of information  Facilitate individuals to make informed choices  Promotion of security of pensions supported by Pensions Board information and guidance services  Policy is to secure compliance without recourse to legal action, unless necessary

5 PENSIONS REGULATORY LEGISLATION  Bulk of legislation is contained in the Pensions Acts  Also supported by underlying Regulations and Guidance Notes  Approval of schemes for tax relief purposes – fiscal legislation  Pensions also indirectly regulated by other legislation, e.g. Family Law, Part-Time Work  Occupational pension schemes are also subject to general Trust Law

6 THE PENSIONS BOARD  Set up under the Pensions Act, 1990 to oversee operation of Act  Has policy advisory role as well as regulatory role  Funded by levy on schemes  Representative Board – nominated by specific interests  Has extensive powers directly, and indirectly through the Courts  Can prosecute proceeding through Courts for breaches of Pensions Act

7 HOW THE PENSIONS BOARD IMPLEMENTS REGULATION  Scheme Registration – ensuring all schemes registered with Board  Funding Standard – ensuring Actuarial Funding Certificates submitted  Random Examination – checking compliance with Disclosure of Information requirements  Investigations – non-compliance issues  Whistleblowing – pursuing reports  Prosecutions/ Legal Proceedings – prosecution policy

8 LEGAL POWERS OF PENSIONS BOARD Board may apply to the High Court to :  order employer to pay arrears of contributions  order restoration of scheme resources  order disposal of investments  grant an injunction to prohibit any action likely to cause misuse or misappropriation of any resources of scheme  order replacement or suspension of trustees

9 HOW PENSION REGULATION IS DEVELOPED  Pension regulation has arisen from advice given by Pensions Board to Minister  Either on Board’s initiative or at Minister’s request  Board keeps operation of Act under review  Draws on practical experience of supervision and regulation when advising change  Board frequently operates consultation process when formulating its advice  Board is good forum for debate and discussion on pensions regulatory matters  Board contains representatives of all parties involved with pensions

10 CURRENT AND FUTURE ISSUES  Implementing new legislation  PRSAs – extension of pensions coverage  Pensions Ombudsman  Single Financial Regulatory Authority  EU Directive  National Pensions Awareness Initiative

11 CONCLUSIONS  Ireland believes it has a reasonable balance of pensions regulation  Pensions have continued to develop  No major pension problems since Pensions Act, 1990  We recognise need to constantly evolve regulation - respond to internal and external developments  Need for educated, effective and flexible regulatory body  Good regulatory system essential ingredient in development of supplementary pensions