Minister Burton announces key reforms to strengthen pension governance and regulation


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Newly-structured Pensions Authority and Pensions Regulator among series of changes to improve consumer confidence in pensions system 
 
The Minister for Social Protection, Joan Burton T.D. has today (23rd April 2013)  announced a number of changes to strengthen governance and regulation of the country’s occupational pensions and give consumers greater input into pensions policy.
 
Separately, following a consultation process, the Minister will move to fully implement the recommendations in the 2012 Report on Pension Charges.
 
The changes to governance and regulation include a newly-structured Pensions Authority and Pensions Regulator, and actions aimed at tackling excessive fees on some pension schemes.
 
In line with expert recommendations, the Pensions Board will be renamed as the Pensions Authority and split into two separate bodies with different roles.
 
The existing Pensions Board is a 17-member body whose mission is to support a sustainable pensions system through effective regulation, the provision of information to the public, and the development of policy proposals for the Minister and Government. The Minister thanked the current Board for the considerable body of work which they have completed which has greatly contributed to the development of pensions policy over many years. The new Pensions Authority will have two distinct arms – a three-person Pensions Commission with an independent chair to provide oversight of pensions regulation; and a separate unpaid Pensions Council, with a majority of members representing consumer interests, which will advise the Minister on pensions policy.
 
The CEO of the Pensions Board will be renamed the Pensions Regulator.
 
The moves are aimed at improving governance, ensuring greater public awareness of pensions oversight and increasing consumer trust in the pensions system.
 
Minister Burton said: "Following the publication of the OECD report, it is clear that the pension system needs a far stronger consumer focus and these changes represent the first step in the process of creating a pension system that is responsive to the needs of members of pension schemes and pensioners. The separation between regulatory oversight and policy development will ensure there is no perception of regulatory ‘capture’ by the industry and give greater confidence to consumers. These changes, combined with action to tackle excessive pension charges, will give the public greater trust in the pensions system.
 
"In particular, I look forward to the new Pensions Council bringing a fresh perspective to the formulation of pension policy that has the consumer at its heart. The first task I will be giving the Council will be to monitor the implementation of the recommendations in the Report on Pension Charges and advise me if further actions are needed.
 
"The recommendations call for more transparency and consumers getting better and clearer information from their pension managers.  The pensions industry needs to communicate more regularly and more directly with its customers and be far more upfront in drawing people’s attention to its charges and the impact that these can have on the size of your pension pot than it has been to date," Minister Burton said.
 
"I intend to keep the implementation of these recommendations under review over the next year and will have no hesitation in legislating to strengthen compliance and transparency if I don’t see visible progress within this timeframe."
 
The Minister also announced today the amalgamation of the offices of the Pensions Ombudsman and Financial Services Ombudsman. She welcomed the decision of Paul Kenny, Pensions Ombudsman, to defer his retirement and continue in office to assist in the merger of the two offices.
 
"Amalgamating the expertise of the Pensions Ombudsman with the Financial Services Ombudsman will provide the consumer with a one-stop shop for queries on pensions and financial products."
 
The recommendations in relation to the Pensions Board and the Ombudsmen are made in a Critical Review conducted by a steering committee chaired by Richard Hinz, Pension Policy Advisor at the World Bank. The committee included senior representatives of the Departments of Social Protection, Public Expenditure and Reform, and Finance as well as the Pensions Board, the Central Bank, the Office of the Pensions Ombudsman, and the Financial Services Ombudsman.
 
The Critical Review recommends:
  • Keeping the regulatory function of the Pensions Board separate to the Central Bank at this time.
  • Restructuring the Pensions Board to distinguish between the regulatory and policy advisory functions.
  • Dividing the governing body of the Pensions Board in two bodies – a three-member regulatory oversight group comprised of an independent chair and Government representatives; and an unpaid policy advisory council with broader representation of stakeholders.
  • Renaming the Pensions Board as the Pensions Authority to ensure public awareness and clarity of its role and functions, distinguish it from the policy advisory activities, and obviate the current perception of regulatory capture. 
  • Renaming the CEO of the Pensions Board as the Pensions Regulator. 
  • Amalgamating the Pensions Ombudsman and the Financial Services Ombudsman to provide a single reference point for the public on financial products, facilitate the sharing of expertise, and deliver an enhanced service for consumers.
 
The Government has accepted the recommendations in the Critical Review and the Minister will move to implement them in the forthcoming Social Welfare Bill.
 
PRESS RELEASE ENDS
 
Both the Critical Review and the 2012 Report on Pensions Charges, as well as the OECD Review of the Irish Pensions System, are available on the Department’s website at www.welfare.ie
 
Note to Editors:
 
RECOMMENDATIONS OF THE REPORT ON PENSION CHARGES 2012
 
The following specific recommendations are proposed:
  1. Continue to monitor the implementation of the 2012 Consumer Code (Central Bank) and take specific actions to:
    1. Examine the practice of re-brokering to ensure that it is always in the best interests of the consumer; and
    2. Conduct an exercise to ensure compliance with the recently introduced requirement for Annual Statements.
  2. Develop approaches to improve consumer, employer and trustee awareness and knowledge of pension charges. This should ensure that information is clear and concise. It should be standardised, where possible, and based on best practice.
  3. Develop a communications action plan on pension charges.
  4. Improve trustees’ knowledge and awareness of pension charges.  Take specific actions to:
  1. Develop a separate module on pension charges in trustee training;
  2. Provide a support service to trustees setting out principles and best practice.
  1. Review occupational pension disclosure regulations specifically to:
    1.  Provide for the issue of an Annual Statement to all deferred members;
    2. Improve the information provided in the Statement of Reasonable Projection and the need for focussed detail should be reviewed.
  2. Monitor developments and continue efforts to develop a single standard measure that would assess all costs and charges and thereby enable easier comparisons to be made.
  3. Conduct further research on the drivers behind consumer choice of individual pension products – with particular reference to PRSAs.
  4. Ensure data on charges is collected on a periodic basis - 3 yearly intervals is considered appropriate - to allow for continued scrutiny and future decision-making.
  5. Evaluate the impact of this report, these recommendations and future EU developments after two years and assess if further and more stringent recommendations are required.
Last modified:23/04/2013