The Pensions Authority held a seminar today in Dublin where the Pensions Regulator, Brendan Kennedy, set out the Authority’s plans for the industry for the next five years and highlighted areas which are a cause for concern.

The Pensions Regulator expressed concern with the current low interest rate environment and the negative affect this was having on pension scheme funding. Initially, it was hoped that the interest rates would bounce back, but the industry is slowly coming to the realisation that low interest rates may be with us for years to come. Market losses and market volatility were highlighted as other issues affecting the sector.

The Pensions Regulator highlighted that Defined Benefit (DB) pension schemes were still the focus of much attention of the Pensions Authority. There are over 700 DB schemes in Ireland. This number has fallen by approximately 400 in the last six years due to DB scheme wind-up. The Pensions Regulator emphasised that the key areas of concern from a DB perspective were poor communication, high charges and poor investment.

When it comes to Defined Contribution (DC) pension schemes, the Pensions Regulator believes that the gap that exists between a member’s expectation and the reality of what a member receives at retirement is a problem. The Pensions Regulator stated that it was “worrying how many people don’t know what to expect” when it came to retirement income. He indicated that poor administration and high costs were areas the Pensions Authority were focusing on.

In terms of the Pensions Authority’s five year plan, the following were highlighted as specific goals:

  1. Increasing the level of visible oversight of occupational pension schemes and PRSAs
  2. Setting clear expectations of trustees and pensions professionals
  3. Providing a reliable information service for the public
  4. Setting out proposals for legislative change

In the short-term the Pensions Authority intends to focus on the area of compliance. This will involve responding to compliance queries, making on-site visits and undertaking audits of pension schemes. The Pensions Authority also intends to continue to work with DB schemes that fail the funding standard, but highlighted that there are a number of schemes where the only option may be wind-up.

A particularly insightful moment of the seminar occurred when the Pensions Regulator recounted a story of a friend who asked for help deciphering a letter that he had received outlining his options at retirement. The letter had been produced by a large pensions consultancy, but it still took the Pensions Regulator “several hours and a calculator” to make sense of it.

If the Pensions Regulator himself was befuddled by the content of the letter then what chance would a person with no pensions experience have!

It is clear that the next five years will see an increasing focus by the Pensions Authority on the compliance of pension scheme trustees, employers and professionals with the legislative requirements. However, the pensions industry needs to be conscious that in adhering to these legislative requirements they do not produce material that only serves to confuse rather than educate, as the Pensions Authority will be watching!