Cantillon: No winners as Government
dithers on pension reform
Irish Times (Ireland)
June 27, 2013
It’s only one side of the conversation, of course, but the recurring theme of a pensions seminar hosted by employers’ group Ibec yesterday was the unreasonable approach to regulation of the sector by the Government and the Pensions Board.
Neither does themselves many favours. With 80 per cent of defined benefit pension schemes under water and companies struggling just to continue current employment levels, the regulatory threshold just keeps getting higher. [EXPAND Read more]
“Assets are going up [as markets recover] but the MFS [minimum funding standard] just keeps running away from us,” one speaker said yesterday.
The minimum funding standard is the bete noire of the sector these days – the rule that says all schemes must be in a position to meet their long-term pension obligations in their entirety if they were wound up today. Schemes with a deficit by this measure must file recovery plans, or “funding proposals”, with the regulator by Sunday. Industry sources say as many as 800 schemes will be in that position, including some of the largest.
And there’s no guarantee their plans will be accepted. If the regulator deems them unrealistic, it can force companies to wind up their schemes, leaving workers substantially out of pocket in retirement – not least by the Government’s repeated refusal to address the “manifestly unfair” order of who has priority claim to the assets of an underfunded scheme being wound up. Effectively, pensioners’ income is sacrosanct regardless of the size of their pension (because they have no chance to recoup losses) while everyone else has to scrap for a share of what, if anything, is left.
Despite the unprecedented common front for change being presented by employers, unions, the pensions industry and actuaries, the Government keeps long-fingering reform.
And in an even more ludicrous twist, following a recent European court ruling Ireland is now in the position where workers in a profitable company could end up with a smaller percentage of their pension benefits than colleagues in a company that has collapsed.
For those companies entering increasingly difficult conversations with employees fearful about their future there is, as one speaker noted yesterday, “no good news in any of this, except that you are saving them from worse news”. [/EXPAND]