WHAT THE REGULATORS EXPECT FROM PENSION FUNDS Anne Maher Chief Executive The Pensions Board Ireland 23 November 2005

2 Agenda  Why we regulate  How we regulate  What regulators need from the regulated 2

3 Why we regulate Because “Pension funds are set up to serve as a secure source of funds for retirement benefits” (OECD) 3

4 Why we regulate To  Control commercial relationships between parties whose knowledge or power is unequal  Avoid risk of market failure of a financial institution  Enhance equity, adequacy and security  Avoid abuse of any government tax encouragements  Influence pension take-up Not to  Thwart good pension provision 4

5 How we regulate  Principles or rules based  Heavy or light prescription  Heavy or light supervision  Influenced by historical development  Influenced by national culture  All countries are different  EU Pensions Directive now requires minimum level 5

6 What regulators need from the regulated  Governance – to have well run pension funds  Accountability – to supervisor and stakeholders  Communication – to beneficiaries  Funding – to ensure liabilities are met  Co-operation and trust 6

7Governance  Governing body  Good repute  Identification of responsibilities  Understanding of responsibilities  Expert advice  Independent auditing/actuarial certification  Internal controls  Good administration/IT support  Reporting  Disclosure 7

8Accountability  Produce Audited accounts Actuarial valuations Annual Reports  Make audited accounts / actuarial valuations / annual reports available to Stakeholders Regulators  Overall accountability to regulator  High standard, timely reporting to regulator 8

9 Communication  Fund information to beneficiaries  Personal information to beneficiaries  All information to be in clear, unambiguous language i.e. communication  Availability of ‘contact’ for beneficiaries 9

10 Funding  Expert advice  Funding plan in place  Regular independent verification  Regular monitoring  Meet regulators funding requirements  Ensure beneficiaries aware of funding position 10

11 Co-operation and Trust  Openness and transparency with regulator  Positive approach to regulation  No ‘avoidance’ of regulation  No regulatory arbitrage  Trust that regulator/pension fund have common objective  Foster trust in pension fund beneficiaries 11

12 Conclusion  Regulators and pension funds have common objectives  Co-operation will achieve these objectives  TRUST YOUR REGULATOR! 12