Pensions Regulation & Supervision in Ireland Anne Maher Chief Executive, The Pensions Board, Ireland 18 September, 2006 Conference on Supervision of pension systems - current trends and issues. International experience. Warsaw, September 2006

Agenda  Current Irish pensions model  Pension regulation and supervision in Ireland  Pensions Board role  Future direction 2

Current Irish Pensions Model  First Pillar State universal basic benefit  Second Pillar Private voluntary supplementary benefit 3

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 4

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 5

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 6

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 7

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 8

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) 9

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 …” 10

Pensions Board Regulatory Powers  Power to investigate  Power to prosecute  Power to remove trustees  Power to restore assets  Power to dispose of assets 11

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 12

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 13

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 14

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? 15

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 16

Conclusion  Good regulation/supervision is a key ingredient in any pension system 17