“The Pensions Board to re-introduce the funding standard obligations for defined benefit pension schemes by year end”

28 October 2011: The Minister for Social Protection, Joan Burton TD, has announced changes to the funding standard for defined benefit schemes.  On foot of this announcement The Pensions Board will publish revised guidelines for defined benefit schemes in deficit by the end of 2011.  It will also announce new deadlines by which schemes in deficit must submit a recovery plan to the Board.

The Board are currently working on the technical implementation of the Government’s announcement and expect to publish full updated guidelines by the end of the year on Section 49(3) and Section 50/50A guidance. The Board published its certification conditions for sovereign annuities on Wednesday 26 October 2011.

Speaking today about the re-introduction of the funding standard, Brendan Kennedy, Chief Executive of the Board, said: “The position of Irish pensions remains serious. Current economic circumstances mean that some pension savers and sponsoring employers have great difficulty in making the contributions necessary to make good the investment losses incurred in 2007-2009 and to meet the ever increasing costs of providing retirement benefits.”

The Board estimates that some 70% of defined benefit schemes are in deficit and in many cases the deficit is substantial. During 2009 and 2010, the Board granted a number of extensions to the statutory deadlines for submission of funding proposals.  In mid-October 2010, the Board again deferred the deadline for the submission of funding recovery plans in response to the Government’s review of all defined benefit issues raised in the National Pensions Framework.

Kennedy stated: “The suspension of the funding standard deadline was a pragmatic decision taken by the Board to allow schemes time to deal with their funding deficits. Trustees of defined benefit schemes in deficit must prepare recovery plans and in many cases, submit them to the Board for approval.  These plans must have two objectives – to eliminate the scheme deficits and to place the scheme on a stable footing so that members and their dependants can be reasonably confident that the benefits promised will be paid. When considering a recovery plan, trustees must do more than simply identify the minimum contribution rate needed to eliminate the deficit.  Instead, trustees should consider the future of their scheme, its long-term prospects, the range of risks it faces, and the contributions which members and the sponsoring employer are willing to make. Trustees must recognise the contribution rate, the investment policy and, where relevant, changes to the benefits structure, as being interrelated, and the best solution is one that allows the scheme to undertake appropriate investment risk to achieve long term returns without such risk endangering the benefits already accrued by members.”

Kennedy further stated: “The revised guidelines will take account of the changes introduced by the Minister, and will also provide all the technical information needed by trustees and their advisers to prepare a recovery plan. The new deadlines will give the trustees adequate time to prepare funding plans in light of the new funding requirements, and that the first deadlines will be no earlier than 1 July 2012.”


The Board continues to up-date guidelines, information and FAQs on changes in relation to pensions as they occur. News of any changes is posted on the Board’s website. The Board provides a free “News by e-mail” alert service – which is available at www.pensionsboard.ie


For further information, please contact: 

David Malone                       Tel: (01) 613 1900
Head of Information
The Pensions Board                                     


The Pensions Board

The Pensions Board is the statutory body established by The Pensions Act 1990 to regulate occupational pension schemes, trust based RACs and Personal Retirement Savings Accounts (PRSAs) and to advise the Minister for Social Protection on overall pension policy development. See www.pensionsboard.ie

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About the Pension’s Calculator

  • This pension’s calculator is designed to give a broad indication of the level of contributions required to give your desired pension at your retirement age. This calculator only provides a sample indication of the funding contributions for your pension and no reliance should be placed on it.
  • This calculator does not take into account any contributions an employer might make to your pension.
  • Do you know that contributions paid to a pension scheme will benefit from income tax relief at your highest rate of income tax? This calculator takes into account current income tax relief benefits.
  • For a full and accurate assessment of your personal finances and any tax relief you may be entitled to on your pension contributions always consult with a professional financial adviser

The next step is to talk to your employer, trade union, bank, insurance company, building society or financial advisor about starting your pension today.

Pension Calculator Notes:
  1. Assumptions used: Investment return will be 5% per year before retirement and 4% per year after retirement. Salary will increase at 3% per year. Pension will increase at 2% per year in retirement. The State Pension will increase in line with salary increases. Spouse's annuity assumes a 3 year age gap between the Main Life and Spouse. Your personal illustration above makes an approximate allowance for the recently introduced Pensions Levy (i.e. 0.6% of your Fund Value) until 2014 or your intended retirement year if earlier.
  2. Contribution amounts shown will increase each year as salary increases.
  3. The actual pension at retirement will depend on actual investment return and salary inflation up to retirement and on the cost of purchasing annuities at retirement.
  4. Tax relief calculations take account of age related limits on tax relief in any given year as prescribed by the Revenue. Your financial advisor will be able to help you to stay within your limits. The maximum tax relief as a % of earnings are as follows:
         Under 30: 15%
         30 to 39: 20%
         40 to 49: 25%
         50 to 54: 30%
         55 to 59: 35%
         60 and over: 40%
  5. Contributions or benefits may exceed limits prescribed by the Revenue. Your financial advisor will be able to help you to stay within your limits. Budget 2011, introduced a Standard Fund Threshold (SFT) of €2.3 million. Individuals with pension funds in excess of this value as at 7 December 2010 may apply for a Personal Fund Threshold(PFT). When the capital value of pension benefits drawn down by an individual exceed his or her SFT or PFT as appropriate, a tax charge of 41% is applied to the excess fund.
  6. In these net contribution calculations, PAYE & single persons tax reliefs and single persons tax bands are assumed. It is also assumed that no other tax reliefs apply.
  7. The annuity rate used to convert your pension fund at retirement age is a long term average annuity rate, which makes no allowance for the recent gender equalisation ruling. The annuity rate used in your personal illustration above will be shown when you run the calculator.
  8. This calculator takes account of the fact that the State Pension (Transition) will no longer be paid from 1 January 2014. This means that there will then be a standard State Pension age of 66 years for everyone. If you have qualified for the State Pension Transition before 1 January 2014 you remain entitled to it for the duration of your claim (1 year). State pension age will increase to 67 in 2021 and to 68 in 2028