Dáil Éireann - Volume 572 - 21 October, 2003
Written Answers. - Pension Provisions.
Mr. J. O'Keeffe Mr. J. O'Keeffe
396. Mr. J. O'Keeffe asked the Minister for Social and Family Affairs her views on whether there is a substantial pension funding shortfall relating to the private sector workforce; the estimated extent of this shortfall; and her proposals in this regard. [24227/03]
Mary Coughlan Mary Coughlan
Minister for Social and Family Affairs (Mary Coughlan): There can be no doubt that the exceptional fall in global equities markets over the past two and a half years has had a major impact on  the asset base of pension funds with the major gains of the past severely reduced in recent years.
Trustees of schemes are required, under the Pensions Acts, to certify at three and a half year intervals that the assets of the scheme would have been sufficient at a specified date to meet the liabilities of the scheme if the scheme had wound up at that date – this is known as the minimum funding standard, MFS. In July this year I signed into law an amendment to the Pensions Acts which requires that, during the three and a half year interval, actuarial reviews must be undertaken to establish whether a scheme continues to satisfy the MFS and corrective measures taken where a negative assessment arises.
In deciding whether to commence this additional requirement, at a time when some pension schemes were experiencing difficulty, I took the view that whatever might be done to alleviate the problems in the short-term, it was in everyone's interest that any shortfall in funding is highlighted at the earliest possible opportunity.
Where a scheme does not meet the MFS, a funding proposal, designed to show a return to full funding within three and a half years, must be submitted. In view of the difficulties being experienced, and after wide consultation with all stakeholders, I made provision in the Social Welfare Act 2003 to strengthen the powers of the pensions board to allow it to respond to current difficulties, on a case-by-case basis, where schemes find themselves with funding issues which are caused by the problems on the markets.
The amendment I made gives the board power to consider granting a longer period over which the failure to meet the MFS has to be rectified in response to an application for an extension from the trustees of a scheme. In August of this year, the pensions board published guidelines for trustees as to how this process will operate.
I understand from the pensions board that an indication as to the extent of the shortfall is that of the 386 actuarial funding certificates which have been received by them this year, 47 have not met the MFS. Of those, 28 have had their funding proposals approved and the balance are currently under consideration by the pensions board. The number of schemes in respect of which trustees have sought an extension of the period for a return to full funding is 12. However, a full picture of the extent of the shortfall in pension funding will only become clear as such applications are received over the coming year.
I have always made it clear that I regard these short-term measures as a stop gap only and that the underlying issue of the appropriateness and effectiveness of the funding standard today must be addressed. An expert working group, established by the Pensions Board, is examining this difficult issue. Its report will form the basis for a consultation process to take place early next year and I expect to receive a report from the pensions board by the end of next year. I hope that, despite the complexity of the issues involved, all stake holders will engage fully with the process to ensure that any proposals for change are in the best interests of members.
Dáil Éireann 572 Written Answers. Pension Provisions.