New rules aren't about promoting risky bonds -- pensions regulator
HEAD of the Pensions Board Brendan Kennedy has denied that the aim of new rules for company pensions is to incentivise them to invest in risky Irish bonds.
It has been estimated that up to €2bn could be raised by the State this year by issuing annuity bonds to domestic pension funds -- but the risks associated with these would be transferred to pensioners in the schemes.
Mr Kennedy said he was not trying to encourage investment in sovereign bonds to help out the National Treasury Management Agency.
He was responding to concerns expressed by industry figures that the new rules will encourage investment in higher-yielding eurozone bonds, such as debt issued by Spain, Italy and Ireland.
"It is not our brief, and it is not our intention, to incentivise anything," said Mr Kennedy, noting that because trustees would be able to avail themselves of sovereign bonds and sovereign annuities, it was the regulator's role to reflect all options in its guidance.
The NTMA is ready to raise funds of up to €2bn this year by issuing annuity bonds to domestic pension funds. If successful, the issue could help ease the Government's funding requirements beyond 2013.
While the amount of issuance is yet unclear, fixed-income research firm Glas Securities has put it in the range of €1.5bn-€2bn over an 18-month period. Asked what he thought about the absence of a change in wind-up priority in the Social Welfare and Pensions Act, Mr Kennedy declined to comment, as wind-up priority is outside of the Pension Board's remit.
Joan Burton's Department of Social Protection has been accused of rowing back on a promise to ensure that workers don't lose out to pensioners when a company pension scheme is being wound up.
The Irish Association of Pension Funds (IAPF) said that under the present rules some people stood to get nothing when a fund is closed down.
To counter this, the Government had been looking at changing the Pensions Act to ensure that money left in a scheme being shut down is more evenly divided between those currently receiving a pension, those still paying into it and deferred members who have yet to retire.
It had been proposed that pensioners would get pensions up to a €30,000 maximum, or 75pc of expected benefits, whichever is the lower.
This would mean that those on high pensions of around €60,000 or higher would face a large cut in their retirement income if the sponsors and trustees of their scheme decide to shut it down. Eight out of 10 schemes are in deficit and at risk of being wound up.
Pensioners receiving payments get first call on the assets of a scheme when it is being closed down, which often means there is nothing left for active and deferred members.