Report on Ibec’s pension seminar, 27 March 2014
Ibec’s 2014 pension seminar put the focus on issues related to managing defined contribution (DC) pension schemes and asked a number of critical questions for employers with DC pension schemes.
What’s your DC pension scheme for?
Patrick Cosgrave, Tower Watson’s Head of DC Consulting in Ireland, drew on Towers Watson research to talk about how employers in Ireland want to have pension schemes for staff, as part of their strategy to attract and retain employees. However if the employer objective is to provide adequate income for employees on retirement, many DC schemes will not deliver this, he said. Workforce planning will have to take account of having employees who need to work longer to get an adequate income. ‘Is 75 becoming the new 65?’ he asked. Greater attention on communication with employees and scheme governance is needed, some of which is likely to be addressed in the forthcoming revision to the EU Directive on occupational pension funds.
Pensions Authority’s consultation on DC schemes
Mary Hutch of the Pensions Authority (formerly the Pensions Board) outlined key findings from a recent consultation process on DC schemes. The Authority believes Ireland should move from having over 100,000 DC schemes to the smaller number of between100 and 150. The high number makes it hard to oversee schemes and means that are too many trustees, many of whom may not be sufficiently expert on pension matters. The Authority indicated a need to improve trustee performance, set minimum standards and codes of governance, be able to pre-approve schemes, and overall improve transparency and value for money for members.
IR update on pensions
Anne Byrne, IR/HR Executive in Ibec examined pension developments from an IR perspective and reported on recent Labour Court cases. Such cases have mainly addressed the restructuring of defined benefit (DB) pension schemes and the Court has taken into account the level of consultation and engagement between the parties and often provided parameters for further negotiation. While it has facilitated, in limited circumstances, the closure of a DB pension scheme and the introduction of a DC scheme, the Court does not position itself as a technical pension forum, but sees its role to help resolve IR Issues. Anne also summarised pension equality cases in Ireland and the outcome to the case on age-related pension contributions heard at the EU Court of Justice.
John Crane Ireland case study
There was a useful case study by Michael Cusack, HR Manager at John Crane Ireland, who talked about the company’s path to closing their DB scheme and replace it with a DC scheme. Mr Cusack spoke about how tough this process is on trustees. John Crane Ireland had moved to a hybrid pension scheme in 2006, then a funding proposal was agreed in 2011 and in 2012 the company announced its DB scheme closure. In 2013, the Labour Court recommended further engagement between the parties, which led to a final deal on replacing the DB scheme with a DC scheme, with limited compensation for members. The lessons shared highlighted the high level of consultation required, the challenge to try to achieve adequacy of provision, the effect of reduced allowances and the slow process to switch funds.
John Crane Ireland was one of the few companies in attendance to have changed their retirement age to match the state pension age.
Liam Connellan, Partner in William Fry’s Employment and Benefits Department, talked about the legal requirements of DC schemes and how an employer has the power to establish the scheme, appoint trustees, amend and terminate contributions and then they delegate significant powers to the trustees. Legal potholes to be avoided include eligibility for membership, remittance of contributions and member investment choices.
Ibec DC policy update
Loughlin Deegan, solicitor and senior adviser in employment rights and pensions in Ibec referred to the recent OECD report and argued that auto enrolment may work if there is no mandatory contribution required. This model has work successfully elsewhere, and neither employers nor employees are, nor are likely be in the future, in a position to cope with mandatory pension contributions.
Loughlin concluded by launching Ibec’s Stop the pension levy campaign, highlighting the cost at the level of the individual employee of the pension levy on an annual basis. Join the campaign on #stopthelevy.
Our thanks to Towers Watson for sponsoring the event.
Monday, 7 April 2014