Nine out of 10 defined benefit pension schemes in Ireland do not meet the legally required funding standard, according to the chief executive of the Pensions Board, Brendan Kennedy.
A small number of schemes do not even have sufficient assets to meet the liabilities of current pensioners, Kennedy added, speaking last week at the launch of the Pensions Board’s annual report for 2008.
Kennedy said that the Pensions Board, the state authority for pensions, was equally concerned by how poorly defined contribution schemes had performed in 2008, even though he acknowledged that 2008 was an extremely difficult year for pensions.
“Although pension losses were unavoidable, the experience of 2008 was worse than it could or should have been” said Kennedy.
He warned that the investment and funding of too many defined benefit schemes were based on “aggressive investment return assumptions and did not take enough account of investment risks and downsides”.
Tiarnan O’Mahoney, the board’s chair, said that the investment losses since 2007 have been so great that some people are asking whether it makes sense to save for retirement at all.
The board stated that, above and beyond investment losses, around 50 per cent of private-sector workers were not members of an occupational scheme. This is despite a survey conducted by the board, in which 80 per cent of workers said that the state pension of around €230 a week would be inadequate for retirement.
Minister for social and family affairs, Mary Hannafin, said the introduction of a pension protection fund, as exists in the UK, was “very unlikely” as the cost to the state would be “extraordinarily expensive”.