Business Pensions

Monday 21 October 2019

Deadline for proposals on troubled pension schemes will be extended

Charlie Weston Personal Finance Editor

THE deadline for bust company pensions to submit plans to restructure their funds is likely to be pushed out beyond June, experts have said.

Pensions consultants have also questioned whether the Department of Social Protection and the Pensions Board will be able to press ahead with changes to the wind-up order for bankrupt schemes as soon as June.

Changes to what is called the priority order in wind-up could mean big cuts in pensions for retired members of insolvent schemes.

Consultancy LCP has suggested that officials will now need more time to change the wind-up order after last week's ruling from the European Court of Justice on the need for a guarantee for schemes where both the scheme and the company close.

The current rules mean that when a scheme is wound up, those in receipt of a pension have first call on the assets.

In practice, this means that pensioners get a full pension but those under the age of 65 often get a fraction of the promised retirement income.

Some eight out of 10 defined-benefit schemes are in deficit, which means they will not be able to meet the promises of up to two-thirds of final salary for those who have full service when they retire.

Banks including AIB and Bank of Ireland have massive deficits. AIB's is €800m and Bank of Ireland's is €1.2bn. Aviva and Permanent TSB are winding down their defined benefit schemes, while the publisher of this newspaper, Independent News & Media, is considering reducing benefits for active and deferred members.

Officials in the Department of Social Protection are considering proposals from the the Society of Actuaries last year, which would mean big changes to the distribution of assets between those who are retired and those yet to retire from a defined benefit scheme.

The reform proposals have the backing, in principle, of industry, employers and unions.

Under the proposals bankrupt schemes would distribute more of their assets to members still in work. This could mean big cuts to retired members.

They are likely to get a minimum of €6,000 a year, under proposed changes to the wind-up priority rules. They get more if the funds are there.

But LCP Consultancy's Martin Haugh has questioned if trustees of schemes will be able to get a funding proposal submitted to the Pensions Board by June 30 if there are big changes to the wind-up priority rules.

Head of the Irish Association of Pension Funds, Jerry Moriarity, said there were so many issues now up in the air that there was a need for clarity from the department on the deadline for funding proposals.

Irish Independent

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