IRELAND - Irish pension funds have been given an extra six months to state how they might address any shortfall to their minimum funding standards, as current market conditions mean three out of four schemes would be considered underfunded if wound up.

Mary Hanafin, minister for social and family affairs, today told delegates attending the Irish Association of Pensions Funds' annual conference they will have an extra six months to file their one-year check document concerning minimum funding standards (MFS) as the current market turmoil is making it impossible for funds to know what their positions should be by the end of the year.

"I accept there are short-term difficulties for us and sponsors. I know you have to state on an annual basis whether the scheme has enough assets were the scheme to be wound up and if not put in a proposal to deal with it. So I have asked the Pensions Board to allow additional time for the funding proposals as a temporary measure," said Hanafin.

Those schemes which file the annual MFS health check on 31 December or 1 January - which states whether a scheme could cover its liabilities if wound up tomorrow - will now have an extra six months to assess how they might meet funding shortfalls.

"We are giving them sufficient time to get them ready. There will be no additiona time for actuarial funding certificates. In relation to the operation of the funding statement in general, that comes under the green paper. And we are still working towards have that overall policy introduced and sorted out by the end of the year," added Hanafin.

This temporary concession was welcomed by delegates managing defined benefit schemes, in part because around 80% of Irish DB file their documents on those dates, according to officials at the IAPF.

It also came at the same time as actuaries revealed the scale of the problem means three out of four schemes may be underfunded yet the moment any funding problem is triggered means a funding solution has to be in place by that date - a task schemes will struggle to achieve while market conditions are so turbulent.

Philip Shier, from the Society of Actuaries, noted in light of Irish managed pension funds being down around 20% in a year, the likelihood is any scheme which was 101% funded at the start of the year could be facing similar losses, depending on their risk strategy.

"Trustees are relatively powerless in many ways because they have to agree a funding proposal. Ultimately, the driver will be the employer and what they are willing to pay," said Shier.

Maurice Whyms, formerly of Mercer and now a partner of the new firm Attain Consulting, presented the IAPF's view on MFS and revealed whereas the green paper earlier noted one in four schemes failed the MFS, anecdotal evidence from local schemes suggests that figures has tripled.

More importantly, any scheme which first had a funding standard trigger flagged by the actuary in March or April will have had to go through several rounds of meetings with employers, trustees, unions and employer representatives to gain official approval of any solution by 31 December, and the likelihood is any agreement attained at an earlier stage in discussions will not reflect the actual funding position by the end of the year.

"In the current conditions, the fundings standards [regulation] is much more of a nightmare. If the actuary comes along and says the TAR is off-track, they will need to have a funding proposal ready by the end of the year. That agreement has to take into account the position right up to the last day," said Whyms.

"Trustees end up having to go through the whole process again and maybe again. At the best of times, it is frustrating and costly and it could adversely affect the employer's good will on DB provision," he added.

The MFS is one of the key elements which the Irish government has covered this week in its report on the pension green paper consultation, and which presents many of the ideas put forward by interesting parties on tackling future regulatory processes and requirements.

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