THE regulator for company pensions is to give firms and trustees more time to come up with plans to restructure their schemes, just months after insisting that tough new rules and deadlines would have to be met.
In what amounts to an embarrassing climbdown, the Pensions Board has now told those running schemes they will get until next summer to come up with plans to sort out their schemes.
The deadlines were originally imposed along with strict new rules that have prompted the sponsors of a number of schemes to decide to wind them up.
AIB, IBEC and Arnotts are among companies turning their backs on defined benefit schemes, blaming the new Pensions Board rules, and tight deadlines to come up with restructuring plans under the new regulations.
Some eight out of 10 defined benefit plans in the private sector are in deficit, with the Pensions Board originally demanding detailed plans on how to restructure them to be submitted to it from the end of this year. The board had wanted the 1,000 schemes to set out how the deficit will be reduced by 2023. Some schemes had a deadline of the end of this year, with others given until the end of May.
But now the Pensions Board has rowed back in the face of sustained pressure from trustees and scheme sponsors. All schemes that are in deficit will now have until the end of June next year to submit restructuring proposals.
The deadlines for restructuring proposals were put in place along with tough, new rules forcing schemes to put aside more reserves and to invest in bonds rather than equities.
For schemes that are in deficit, restructuring plans will mean a cut in the retirement benefits for younger members -- with some active members facing the loss of more than half of the pensions benefits they thought they had in place.
Defined-benefit schemes promise to pay a pension based on the final salary and the number of years the member was in the scheme.
The new funding rules set out how schemes must clear their deficits within a decade and demand that between 10pc and 20pc of the scheme's liabilities will have to be set aside if the scheme invests in what is considered risky assets such as equities.
A statement from the Pensions Board yesterday said: "This decision is to allow trustees additional time to fully explore all options available to address scheme funding deficits.
"The board expects there will be no lessening of the efforts by trustees to resolve scheme deficits as a result of the additional time."
Jerry Moriarty, of the Irish Association of Pension Funds, said he had called for the deadline to be delayed.
He said there was now also a need for a easing of the new rules that require schemes that are being restructured to put aside 10 to 20pc of the liability as a "risk reserve". Most European countries were moving away from this, he said.
The Pensions Board had engaged consultancy firm Mercer to review the priority order for schemes that are being wound up. At the moment pensioners get first call on scheme assets.
It makes sense to delay imposing funding proposal deadlines until the priority order review is completed, Mr Moriarty said.