Defined schemes to face 25pc income hit
PENSIONERS on a defined benefit scheme that is then wound up could lose up to 25pc of their retirement income, under new rules.
The Pensions Act will be changed to ensure that money left in a scheme that is shutdown is more evenly divided between those currently receiving a pension, and those still paying into it and deferred members who have yet to retire.
New rules published on the Pensions Board website yesterday state that pensioners will now get pensions up to a €30,000 maximum, or 75pc of expected benefits, whichever is the lower.
This will mean that those of on high pensions of the likes of €60,000 would face a large cut in their retirement income if the sponsors and trustees of their scheme decide to shut it down.
Seven out of 10 schemes are in deficit, and at risk of being wound up.
The fall in German bond yields has made liabilities higher in most defined benefit schemes.
The information on the Pensions Board website says that the assets left over after the pensioners get €30,000 or 75pc of their expected benefits would be distributed among the active and deferred members, with the same limits.
"Pensioners would then get priority in the distribution of the remaining assets before any further assets are distributed to active and deferred scheme members," the briefing note says.
The note goes on to say that the current balance is being tilted to ensure active and deferred members get a greater proportion of the assets of the scheme when it is closed down.