Seán Fleming (Laois-Offaly, Fianna Fail)
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308. To ask the Minister for Social Protection whether or not a company (details supplied) has indicated their intention to cease contributing to their defined pension scheme and consider closing down this scheme; if she will outline the consequences for deferred pensioners in this situation; and if she will make a statement on the matter. [35945/13]

Joan Burton (Dublin West, Labour)
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I cannot comment on any particular scheme. The Pensions Board supervises the regulation of individual schemes in accordance with the Pensions Act.

Seán Fleming (Laois-Offaly, Fianna Fail)
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309. To ask the Minister for Social Protection her views on defined benefit pension schemes that are having difficulties meeting the new requirements and where companies intend to cease contributing to the pension fund and to close the scheme and the position of deferred pensioners in these schemes; and if she will make a statement on the matter. [35946/13]

Joan Burton (Dublin West, Labour)
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I am very aware of the challenges facing the trustees and the sponsoring employers of defined benefit pension schemes. The majority of defined benefit pension schemes are in deficit and face serious challenges in restoring their funding levels to enable the scheme deliver on the pension promise. It is acknowledged that the fundamental problem, facing pension schemes is that pensions are significantly more expensive, due to increasing life expectancy and lower than expected investment returns which are reflect in increased annuity rates.

The Funding Standard provides a benchmark against which the "health" of a scheme can be tested. When a scheme fails the Funding Standard that means that unless some action is taken, the scheme will not be able to pay all the benefits promised. The existence of the Funding Standard itself is not the central issue in relation to whether a scheme is properly funded. Rather the responsibility rests with the employer and the trustees for ensuring that the scheme is properly funded and managed. However, the Funding Standard does provide the regulatory mechanism for ensuring that a scheme can live up to the "promised" level of pension benefits.

In addition to the range of both legislative and administrative measures introduced over the last few years to assist the trustees and sponsoring employers to restore pension provision to a sustainable position, I introduced measures last year to protect scheme members against future volatility in the financial markets. Defined benefits schemes will be required to maintain a risk reserve with effect from January 2016 and to meet this risk reserve requirement by the end of 2023.

It is accepted that the requirement for a risk reserve will present an added challenge for pension schemes, however, guidance issued by the Regulator identifies options which the scheme can consider in meeting this requirement.

The size of the funding standard risk reserve depends on the nature of the assets held by the scheme in question. The greater the amount of lower risk assets held, the lower the reserve requirement. The level of the risk reserve was initially set at 15% of holdings other than bonds or cash. The occupational pension schemes (funding standard reserve) regulations 2013 reduced the risk reserve requirement from 15% to 10% and extended the range of assets which have the effect of reducing the Funding Standard reserve requirement. These additional measures were put in place to provide further assistance to scheme in restoring the scheme funding position.

This measure was put in to protect scheme members from exposure to financial volatility and to assist in securing the future sustainability of schemes. You will be aware that investment losses in Ireland were the largest because of the large share of equities in pension fund portfolios, around two-thirds of assets before the crisis hit, compared with an average of 36% in the 20 OECD countries where data are available.

There has been a decline in the number of defined benefit schemes over the last decade. This decline is replicated in many other OECD countries and is referred to in the recent OECD Review of the Irish Pensions System. The persistent funding difficulties experienced by defined benefit schemes have been well recognised and employers, unions and trustees have been making strenuous efforts to protect the viability of their schemes. While trustees and employers will explore a range of options to secure the sustainability of pension provision, some schemes will wind up. The level of scheme funding at the date of the wind-up will determine the extent to which the scheme can meet all of its liabilities. It is recognised that in situations where a scheme is severely under-funded, the expected level of benefit which an active and deferred members of a scheme will receive will be reduced. Section 48 of the Pensions Act determines the order in which the assets of a scheme are distributed on the wind up of a scheme. This is an issue which has been examined in some depth and is under consideration at present, along with other defined benefit issues. I am keeping the situation under review and will report back to Government in the coming months on these issues. Legislative proposals and additional reforms will be considered at that stage.