1. Pensions Board “on-the-spot fines” - April 2008
Employers and Trustees should now be aware that they are now liable to an ‘on-the-spot fine’ from The Pensions Board if they or their scheme contravenes the specified provisions of the Pensions Act, 1990, as amended (‘the Act’). The fine is €2,000 per trustee per offence.
A comprehensive checklist is available from the Pensions Board website www.pensionsboard.ie. The checklist is designed to help employers and trustees be aware of the potential breaches for which on-the-spot fines may be imposed and to ensure that they do not contravene any of the specified provisions subject to the fines regime.
Implementation of the fines regime
The Pensions Board has issued ‘on-the-spot fines’ to five defined benefit schemes recently for failure to submit an Actuarial Funding Certificate (AFC). In three of the cases the AFC were provided and the fines were paid within 21 days of the notice being served. The Pensions Board decided that no prosecution or proceedings would be instituted in these cases.
In one of the remaining cases, it transpired that the scheme had transferred to a defined contribution arrangement but the trustees failed to advise the Pensions Board. Failure to advise the Pensions Board constituted an offence resulting in an ‘on-the-spot-fine’ .The other case is still under review by the Pensions Board.
Trustee Training
Section 28 of the Social Welfare and Pensions 2008 Act provides for the amendments to the Pensions Act in relation to trustee training as recommended by the “Report of the Pensions Board to the Minister for Social and Family Affairs on Trusteeship”.
As a result of the amendment employers are required to arrange trustee training for each new trustee within six months of their appointment and at least every two years thereafter.
Where a trustee fails to undertake the required training, section 3A has been amended to allow the Pensions Board to apply an on-the-spot-fine against the trustee.
The Pensions Board has advised that it will proactively monitor all provisions of the Pensions Act, including the specific provisions subject to the fines regime. Note, the fine is €2,000 per trustee.
April 2008
2. IAPF Investment Guidelines - May 2008
At the recent Irish Association of Pension Fund seminar a set of investment guidelines was launched. There are seven guidelines each for defined benefit and defined contribution schemes. The first three are common to both schemes and are outlined below:
- Trustees should formally discuss investment matters at least annually (including their compliance with these guidelines).
- Trustees should take expert advice in relation to investment issues unless they are satisfied that they already have the necessary skills and information.
- Trustees should ensure that they comply with all relevant investment regulations. If necessary they should seek confirmation from their investment advisers.
- Trustees should always consider investment risk as well as investment return. They should measure investment risk by reference to the schemes liabilities rather than to average or market returns. Trustees should consider the likelihood and implications of a range of possible outcomes.
- A policy of minimising investment risk may not be appropriate. Expected costs as well as future willingness and ability of the sponsor to fund the scheme should be considered. The sponsor should be consulted as part of these considerations.
- Trustees should review their investment strategy at least every 3 years. This should include a review of overall strategy, liability matching and risk and investment management performance.
- Trustees should retain responsibility for high level strategic decisions in terms of requirements and objectives for risk and return. Trustees may delegate implementation to others and should do so where they do not have the necessary skills.
- The responsibility of trustees in defined contribution schemes is to provide a reasonable range of appropriate investment options for their members. The range should be formally reviewed at least every three years.
- Trustees should consider the likely investment needs of members (including growth, capital protection and income protection) and should measure risk in relation to these objectives and to the likely risk tolerance of their members within 10 years of normal retirement.
- Trustees should ensure that sufficient communication exists to enable members to be aware of the important features of the investment options available to them and should provide for appropriate default strategies for members.
Investment guidelines specific to Defined Benefit Plans
Investment guidelines specific to Defined Contribution Plans
Trustees should retain responsibility for high level strategic decisions in terms of assessing investment objectives, options and default strategies. Trustees may delegate implementation to others and should do so where they do not have the necessary skills.
May 2008
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