PENSION FUND trustees could face legal action if they are found to be in breach of their duties, the Irish Pensions Board chief executive Brendan Kennedy has warned.
Last year, the IPB successfully prosecuted 26 cases and is currently involved in 36 others. Meanwhile, seven trustees of three pension schemes paid fines totalling €14,000 in 2011.
Speaking at the launch of the IPB annual report, Kennedy said that the Board “will have no hesitation” in taking appropriation action – including prosecution – in cases of non-compliance with the Pensions Act.
“In recent years prosecutions have almost entirely been where employers have deducted contributions from employees’ wages and not passed them on to the pension scheme, that is, they kept them,” he explained.
He said that the IPB is concerned about the high volume of cases notified to the Board and says that that it is aware of “a number of cases where offending companies have been put into liquidation and the same directors immediately start a new business and continue their deductions and failure to remit”.
Also speaking at the report’s launch, IPB chairperson Jane Williams voiced concern over the fall in occupational pension scheme membership.
Although a fall is expected given contractions in the economy, she said that “it is of serious concern for the Board given the importance of personal savings to provide for retirement in addition to the State pension.”
The IPB report shows that the total number of active members in occupational pension schemes at April 2012 was 771,878 – down 38,083 members since 2010.
The number of PRSA contracts in force increased by 10,924 during 2011 to 198,038 with total assets of over €3 billion (up €0.29 billion from the end of 2010).
CEO Brendan Kennedy also issued a warning on the level of deficits being seen across defined benefit schemes, saying that “as many as 80 per cent of defined benefit schemes are in deficit and in a number of cases, the deficit is substantial.”
Under a defined benefit scheme, the benefit entitlement is defined by reference to earnings, length of service, an index or a fixed amount and the contributor knows in advance what the value of their pension will be.
“The Board has published deadlines by which these schemes must submit funding proposals to tackle these deficits,” Kennedy said. “The first of these deadlines falls on 31 December 2012. It is now up to trustees to prepare and submit proposals which will put the finances of their scheme on a long-term stable footing.”
The chief executive added that one of the IPB’s objectives is to see as many of these schemes “put on a secure footing and prudently managed” as possible so that the contributors get the pensions they are expecting.