Problems with the current system
The primary concerns of the Board are as follows:
- There are too many small and single member DC schemes currently operating in Ireland.
- It is estimated by the Board that in or around 200,000 people are currently acting in the role of trustee. It is unlikely that all or the majority of those acting as trustees possess the requisite knowledge, experience and commitment for the role; and in the Board's experience the quality of trustees varies greatly.
- Due to the large volume of DC schemes, the Board cannot logistically provide the expected standard of regulation and supervision.
- It is ultimately the members and their dependents who suffer as a result of the above issues, as the costs borne by members of many small schemes are too high, there are lower standards of governance, and members have limited bargaining power in small schemes.
- The level of investment understanding and experience of members is not always taken into account when offering investment choices, and in some cases, the default strategy tends to expose members to an unacceptably high level of risk.
Proposals
The eventual aim of the Board is to benefit members and to
provide them with better value for money by reducing the number of
pension schemes.
Several steps are recommended by the Board:
- Encourage pension schemes to be pooled across employees from different companies, in order to eradicate a number of the small and single member schemes that currently operate.
- Improve governance standards by providing training and education to trustees.
- Publish guidelines and codes of governance for trustees as a central reference point, and maintain regulation by requiring trustees to show evidence of ongoing compliance with these codes.
- Put systems in place whereby trustees will have to prove their credentials and suitability for the role, prove there is no conflict of interest with administrators or employers, and prove that they are committed and have adequate time to carry out their statutory duties.
The Board invited trustees, providers, managers, advisers and
other interested stakeholders to submit comments and suggestions on
the consultation paper up until 30 October 2013. A
number of public meetings were held during this period to discuss
the issues and proposals for change. In due course, a summary
of the discussions and suggestions will be published by the Board
on their website.
The paper can be accessed on the Pension's Board website
here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.