Conference on Supervision of pension systems — current

Conference on Supervision of pension systems - current trends and issues. International experience. Warsaw, 17 -19 September 2006 Pensions Regulation & Supervision in Ireland Anne Maher Chief Executive, The Pensions Board, Ireland 18 September, 2006

Agenda § Current Irish pensions model § Pension regulation and supervision in Ireland § Pensions Board role § Future direction 2

Current Irish Pensions Model § First Pillar • State universal basic benefit § Second Pillar • Private voluntary supplementary benefit 3

Current Irish Pensions Model First Pillar § Flat benefit § Old Age Contributory Pension of 33% average industrial § § earnings subject to contribution conditions Old Age Non-Contributory Pension subject to means test for those not qualifying for contributory pension Funded on pay-as-you-go basis supported by National Pensions Reserve Fund Avoids poverty Expects to provide replacement income for 30% lower paid 4

Current Irish Pensions Model Second Pillar § § § § § Private Voluntary Funded except for Public Service DB/DC Ratio is 2 : 1 Occupational pension schemes, personal pensions, Personal Retirement Savings Accounts Covers 51. 5% of employed people Aims to provide supplementary pensions for 70% higher paid Supported by tax reliefs and pensions awareness campaign Public Service pension: good benefits/ almost universal coverage/ pay-as-you-go supported by National Pensions Reserve Fund 5

Ireland – Pension Regulation & Supervision Regulation § Introduced by Minister for Social and Family Affairs § Developed through Pensions Board advice arising from: • Experience • Consultation • EU requirements § Contained in Pensions Act, 1990 (as amended) and Regulations 6

Ireland – Pension Regulation & Supervision § § § § § Principles of Pension Supervision & Regulation Maintain balance between regulation and cost Take into account voluntary nature of private pensions Trust-based system where trustees have primary responsibility Information disclosure to ensure transparency and enable beneficiaries to monitor Board promotion of pension security Detailed regulation/light supervision Reactive and proactive Cooperation with trustees and advisers Securing compliance without recourse to legal action unless necessary 7

Ireland – Pension Regulation & Supervision § § § Objectives Ensure no monies are misappropriated Ensure beneficiaries receive their full entitlements Ensure monies are appropriately invested Ensure DB schemes are appropriately funded Ensure members are provided with enough information to make appropriate decisions 8

Ireland – Pension Regulation & Supervision Supervisory Players in Ireland § The Pensions Board § The Financial Regulator § Revenue Commissioners § Pensions Ombudsman § Professionals (actuaries, auditors, administrators, custodians, investment managers) 9

Pensions Board § Established in 1990 § Independent statutory body § Represents all pensions interests (Government, employers, trustees, unions, pensions industry, consumers, pensioners) § Has 3 roles (supervisory, policy advisory, pension development) § Supervisory role is: “To monitor and supervise the operation of the Pensions Act, 1990 and pensions developments generally including the activities of PRSA providers …” 10

Pensions Board Regulatory Powers § Power to investigate § Power to prosecute § Power to remove trustees § Power to restore assets § Power to dispose of assets 11

Pensions Board § § § Regulatory/Supervisory Activities Scheme registration – schemes required to register with Pensions Board Funding Standard – requirement to submit an Actuarial Funding Certificate (AFC) at specific times Disclosure Compliance – conduct random audits of schemes Ongoing discussions with relevant parties (e. g. trustees, advisers, providers) Investigations – regular or arising from “whistleblow” reports Prosecutions 12

Pensions Board § § § Funding Standard Applies to Defined Benefit schemes Wind up funding standard – enough assets to meet liabilities if scheme were to wind up immediately Compliance monitored by Pensions Board through submission of Actuarial Funding Certificates Schemes which fail to meet standard must have funding proposal to restore funding Funding ‘extensions’ can be given by Board for up to 10 years More stringent requirements on extensions for ‘cross border’ schemes 13

Pensions Board § § § Issues with current system Concern to avoid over regulation Very complex Over reliance on ‘disclosure of information’ Funding issues for Defined Benefit schemes Low level of contributions to Defined Contribution schemes 14

Future Direction § § § § For supervision Risk-based assessment Different focus required for different types of arrangements Requirement for Pensions Board to hold more information More focus on pension scheme administration Supervisory focus on entity running the scheme/arrangement On-site and off-site supervision More EU driven requirements? 15

Future Direction For Irish pension model § Pensions recognised as major issue § Recent Pensions Board Reports to Government • National Pensions Review • Securing Retirement Income § Government to produce Green Paper on Pensions § Decision will need to be made on future pensions policy § Future regulation/supervision needs will depend on that decision 16

Conclusion § Good regulation/supervision is a key ingredient in any pension system 17