IPASS Annual Conference 2013 Pensions Regulation in Ireland David Malone Head of Operations The Pensions Board

The Pensions Board Established by the Pensions Act, 1990 Supervision, regulation and enforcement Policy, legal and actuarial Information and guidance

Types of private pensions Company Pension Schemes Defined benefit schemes Defined contribution schemes Personal Retirement Savings Accounts (PRSAs) Retirement Annuity Contracts (RACs) or Personal Pensions

Supplementary pension provision in Ireland (as at 31 December 2012)  Defined benefit – 572,681 members in 1,040 defined benefit schemes schemes with 189,644 members are subject to the Funding Standard schemes with 338,037 Public Service employees (full and part-time)  Defined contribution - 232,939 members in 60,192 schemes  Personal Retirement Savings Accounts (PRSAs) 206,936 PRSAs with asset value of €3.46 billion  Personal Pension Plans/Retirement Annuity Contracts (RACs) (200,000 + contracts – Irish Insurance Federation)

Pensions Coverage in the Irish Workforce

Pensions information Enquiry service Information booklets Pension checklists Pension calculators Free Online Trustee Training, Guidance & FAQs, alerts & Trustee supports

Why have a Pension? Life expectancy increasing – 20 plus years in retirement What kind of lifestyle do you want and how will you fund it? Current State pension = € per week 8 out of 10 people say - the State pension will not meet all their needs in retirement Pension = Income in Retirement

Tax relief on personal contributions Highest age at any time during the tax year Limit Under 30 15% % % % % 60 and over 40% For tax purposes limited to earnings up to a maximum of €115,000 in any year. Maximum pension fund of €2.3 million.

Changing world we live in Living Longer More Contract Work More mobility in careers Changing work patterns More Part Time Working Single Parent Households Smaller FamiliesSeparation/Divorce

Changing Demographics

Pensions in the workplace The workplace is the optimum location for pension provision, information and education A company benefits from having: –a reputation and respect as a good employer –a workforce that feels valued and important –increased loyalty and commitment from staff –an enhanced staff recruitment, reward and retention package “A good pension is a valuable asset, don’t leave work without it”

Employers’ Pension Obligations  By law an employer must provide ALL employees with some form of access to a pension, whether they are in full-time, part-time, temporary, contract or casual employment.  All employers regardless of their size are obliged to provide access to a Standard PRSA for “excluded employees”  The Board encourages employers to regard pensions as part of the recruit, reward and retain approach to staff  The Board also encourages all employees to ask their employer about their pension rights

Registered Administrators (RAs)  From 1 November 2008 trustees of every scheme 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

National Pensions Policy The recommendations include :  increasing the State pension age to 66 in 2014, 67 in 2021, 68 in 2028  introducing auto-enrolment  new model defined benefit pension scheme  new model scheme for public servants

The Boards approach to Regulation The Boards allocation of resources is risk oriented on the basis of the following priorities: 1 st priority misappropriation of pension assets or contributions 2 nd priority failure to pay benefits due 3 rd priority inadequate funding of defined benefits 4 th priority inappropriate investment 5 th priority failure to provide prescribed information to members This order represents the seriousness of the risks, not the likelihood of their occurrence. Because regulation depends on Board access to reliable information, we will especially target failure to provide the Board with information required under the Pensions Act, including whistleblowing obligations.

Regulation, Supervision and Enforcement On the spot fines regime introduced in September fine for each offence = €2,000 Compulsory trustees training introduced in February 2010 Registered Administrators introduced in November 2008

Sanctions for non-compliance Board prosecutions: The Pensions Board may take prosecutions against persons who breach provisions of the Act or Regulations made there-under: Offences can be prosecuted by the Board on summary basis (District Court) or by DPP on indictment (Circuit Court) On summary conviction- a fine not exceeding €5,000 or imprisonment for term not exceeding 1 year or both On conviction or indictment by DPP- a fine not exceeding €25,000 or imprisonment for term not exceeding 2 years or both (or in the case of a prosecution under Section 58(a) a fine not exceeding €25,000 or imprisonment for term not exceeding 5 years or both)

Trustee Challenges AdministrationInvestmentRegulationCosts Communication

Main duties of Trustees under the Act register the scheme with The Pensions Board ensure contributions are deducted and paid over to the scheme invest the funds and pay the benefitsensure that the funding standard is metkeep records and accountspreserve or transfer benefitsensure equal pensions treatmentapply the resources of the scheme on wind updisclose information as required

Risk Management for Trustees Where trustees do not have the knowledge themselves, they engage professionals – most often covering administration, investment and communications. It is the trustees’ job to: –question the professionals –to push back, and not to accept answers that they don’t understand or do not feel to be right. The trustees must recognise that it is their responsibility to make decisions, and their options should be set out for them clearly by the professional advisers. This is probably the most challenging aspect of being a trustee. It is important that trustees identify the decisions that they are making, and that they have set out the alternatives among which they are deciding.

Risk Management Strategy Unless trustees have a strategy for dealing with risks, they are not managing their scheme properly. There is no single or simple answer - trustees must identify the best answers for their own scheme. Hoping it won’t happen or hoping that something will turn up is not a risk management strategy. –As a trustee do you know the costs? –How optimistic are the calculations? –How much might they vary? –Are you depending on high equity returns? –What happens if you don’t get them? In the long run, trustees will do themselves and all others concerned with the scheme most good if they look at scheme funding from all angles.

Supporting Trustees The Board supports trustees in the following ways:  the Trustee Handbook  an extensive range of guidance and FAQs on pension matters generally  booklets and checklists for trustees  the Board provides an information and enquiry service  a register of trustee training providers is available on the Board’s website  the Board has developed an e-learning facility for trustees which is free of charge and can be accessed on the Board’s website

Pension Adjustment Orders (PAOs) A PAO designates part of the pension benefits –to a non member spouse –or person representing a dependent child. The Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 (“the Act”) came into force on 1 January 2011 For further information, see - “A brief guide to the provisions of the Family Law Acts” booklet

and to finish….. Thank you for your time and attention. I hope you found my presentation interesting and of some benefit.

Questions & Answers