GUIDELINES ON the new sovereign annuity scheme, designed to allow Irish pension funds increase their holdings of Irish government bonds, are to be published by the Pensions Board next week, chief executive Brendan Kennedy said yesterday.
Speaking at the launch of the Pensions Board 2010 annual report, Mr Kennedy said the board hopes to publish draft approval criteria on the annuities for insurance companies next week.
This will allow companies to launch the products if they so choose.
“It is important to add that once sovereign annuities are out there, each set of trustees will have the option themselves to make a decision. It’s not being imposed on them.”
Asked about his view on the potential risks involved, Mr Kennedy said: “Like a lot of things, it’s a difficult decision. There are pros and cons and we can’t generalise. Different schemes will take different positions.”
On the question of the Government’s decision to put a 0.6 per cent levy on pension funds to fund the jobs initiative, Mr Kennedy said the board had provided technical input to the Department of Finance but had not been consulted on the issue.
“The advice that the Minister for Finance takes is a matter for that Minister, not for the Pensions Board . . . the decision is a matter for Government.”
Minister for Social Protection Joan Burton confirmed her department had written to the Department of Finance raising concern about the new levy. “I felt it was my responsibility, and the department’s, to have a full discussion with the Minister.”
However, the fact that the levy was limited to a four-year period was significant she said.
Ms Burton said a further decision on tax relief on pensions is a budgetary matter and will be made by the Minister for Finance in the context of the budget.
Mr Kennedy also strongly criticised Irish pensions funds’ high exposure to equities, noting that there has been “no noticeable reduction by Irish schemes of their aggregate equity exposure”.
“In very many cases, trustees have not faced up to the issues, and are continuing to expose the benefits of their members to significant risks of further losses.”
He said that, on average, more than 60 per cent of Irish pension funds are invested in equity and property. Approximately 75 per cent of Irish defined benefit pension schemes are in deficit, the board found, with some of these deficits “significant.”
Some 260,000 people were members of defined contribution schemes in 2010, a drop of more than 7,000 on 2009.
The number of active defined benefit schemes registered with the board declined in 2010 from 1,307 to 1,108.
