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It is not clear that there will be any immediate significant legal implications for Irish occupational pension schemes of the UK exiting the EU. However, the effect on the investment market and the continued uncertainty around Brexit is likely to have more immediate and significant consequences for Irish defined benefit schemes and their sponsoring employers.

Many Irish defined benefit schemes are struggling with funding proposals that have gone off or may go off track as a result of poor market conditions. In addition, funding difficulties (and their associated impact on IAS liabilities of sponsoring employers) may trigger fresh scheme reviews and renewed focus on liability (and volatility) management.

Trustees and sponsors will need to consider with their investment and actuarial advisers what can be done to mitigate the risk of continued poor market performance in light of ongoing uncertainty during the proposed transition period. As required by the Pension Authority’s financial management guidelines, an important step will be identifying the main risks schemes are exposed to and what contingency plans can be put in place to reduce any negative impact. A general review of the scheme investment strategy and investment options may also be warranted.
Continue Reading Implications of Brexit for Irish Occupational Pension Schemes

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Since June 2012, under the Occupational Pension Schemes (Disclosure of Information) Regulations 2006, trustees of schemes which are subject to the statutory funding standard are required to submit an Annual Actuarial Data Return each year. Details of the Return are set out in the Disclosure Regulations which must be completed by the scheme actuary and submitted to the Pensions Authority within 9 months of the end of the scheme year.

In the period up to 31 March 2016, the Pensions Authority received 699 Returns and has now published a summary of the information. A copy of the summary is available here. Points of particular interest include:
Continue Reading Pensions Authority releases statistics for defined benefit schemes

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At the Irish Association of Pension Funds Annual Investment Conference held last week, Brendan Kennedy, the Pensions Regulator, reiterated the Pensions Authority’s continued focus on good governance and its plans for ramping up the Authority’s programme of engagement with trustees of defined benefit schemes. This engagement includes continuing to invite such trustees to meet with the Authority for detailed discussions on how the trustees undertake the management of their scheme and their governance responsibilities.

The Pensions Regulator has confirmed that the objective of these meetings is to find out what trustees know and understand. While the Authority recognises that trustees are faced with difficult responsibilities and must take advice in relation to matters in respect of which they have no or limited expertise (for example actuarial, legal and investment matters), as the responsibility for the scheme rests with the trustees, the Authority expects them to understand the advice they receive and the decisions they are required to take. It is for this reason that the Authority insists that the meeting with the trustees be without their financial or legal advisers.

The Authority has indicated that the financial management guidelines for defined benefit schemes (issued in May 2015) will be used as the basis for these discussions. These guidelines outline what the Pensions Authority views as good practice for trustees of defined benefit schemes in relation to their understanding and management of the funding and investment of their defined benefit scheme. While not legally binding, it is expected that the trustees (at a minimum) will have the information and understanding set out in these guidelines. The guidelines cover the scheme data the trustees should have, governance practices relevant to financial management, reviews/processes the trustees should undertake and the analysis the trustees should carry out to arrive at decisions.

Clearly, for defined benefit schemes, the focus is on financial matters and the Authority expects trustees to understand the strategies and plans being pursued by the scheme and be able to explain these and how they were arrived at. According to the Pensions Authority, trustees should know more than their members, have enough time and commitment to carry out the role as trustee properly and be able to ask the right questions (in particular, of their advisers). These meetings are seen as a permanent part of the Pensions Authority’s supervision of defined benefit schemes and perhaps, in the future, will be extended to large defined contribution schemes. It can be expected that the Authority will take a more robust regulatory approach to schemes where they have concerns about trustee ability following such meetings.

The Regulator also announced at the conference that the Pensions Authority was developing pension reform proposals for 2017 and a public consultation process for later this year.

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The funding difficulties facing defined benefit schemes in this country at the moment as well as the strengthening of the Pensions Act funding requirements and re-introduction of funding standard deadlines has seen both scheme sponsors and trustees adopt an increasingly more creative approach to satisfying statutory obligations as well as providing a sustainable basis for funding.  This might include putting in place security in favour of the trustees of the scheme, swapping equity for a scheme deficit (see, for example, the deal struck by UK company, Uniq with the trustees of its pension scheme in 2011 and the recent arrangement proposed by Independent News and Media Group to the trustees of its scheme where the scheme appears to have been offered a 5% equity stake in the IN&M Group as part of a broader deal around restructuring), revising the funding obligation or providing an unsecured parent company guarantee. Continue Reading Creative DB scheme funding approaches – contingent assets and unsecured undertakings

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After much talk over the past 2 or 3 years, at last sovereign annuities have become a reality… nearly.  This week, I was one of the speakers at the launch of the first sovereign annuity approved by the Pensions Board.  Getting to this point is a major milestone in the long journey towards being able to use sovereign annuities. We are not quite there yet though.

One of the speakers at the launch was Anthony Linehan of the National Treasury Management Agency (NTMA). The view in the industry is that sovereign annuities are most likely to be backed by Irish sovereign bonds. Mr Linehan gave a very interesting presentation on the bonds which the State will issue to back sovereign annuities and the process for issuing and pricing those bonds.

It seems that the State will issue what are being called ‘amortising bonds’. These are bonds which will pay out equal annual payments which are made up of a coupon payment and part of the principal which would usually be repaid at the expiry of the bond.  They are ideally suited to sovereign annuities.

Continue Reading Sovereign Annuities – Nearly a Reality