Ireland’s pension regulator wants to cut the number of corporate retirement plans in the country from 150,000 to 100 in a move that would put pressure on pension providers and asset managers to reduce fees.
Brendan Kennedy, pensions regulator at the Irish Pensions Authority, said Ireland's € 90bn corporate pension system needs to be overhauled to make it more "member centred and more efficient".
“Our objective, subject to government consent, is to significantly reduce the number of pension schemes in Ireland,” he said.
Pooling pension schemes into larger plans would result in “higher standards of governance, savings for members and enable us to carry out more detailed oversight of the pension schemes”, he added.
The overhaul of Ireland’s pension system comes as low and negative interest rates globally has dented investment performance and left many retirement plans with large funding holes.
Aisling Kelly, a consultant at Mercer, which advises pension funds, said that by pooling Ireland's pension funds, the plans would have "economies of scale", allowing them to push for lower fees from asset managers.
A report by the Department of Social Protection in Ireland and the Irish Pensions Authority in 2012 warned that fees in the pension industry were often too high.
“Asset managers may be looking at a reduction in total fee volume [if plans are pooled],” Ms Kelly said.
Martin Haugh, an Ireland-based partner at Lane Clark & Peacock, the consultancy, added: “This will make things more competitive.”
A similar measure is being rolled out in the UK, where 89 local government pension funds are being merged into seven so-called wealth funds.
The Irish Pensions Authority’s proposals to reduce the number of pension schemes will form part of a series of reforms it will put forward to the government towards the end of 2016.
It plans to hold a public consultation on its proposals around the middle of this year.
Mr Kennedy said: “We have 150,000 pension schemes in this country. From the point of value for money, from the point of view of the pool of trustees that are available to oversee those pension schemes and from the point of view of supervisory oversight, that number presents significant challenges.”
Jerry Moriarty, chief executive of the Irish Association of Pension Funds, a trade organisation, has raised concerns about the plans to reduce the number of pensions.
He said: “While a smaller number of large schemes have some attractive features in theory, I would be cautious about how it would work in practice.
“In particular, members should have representation to ensure their interests are looked after as they currently are by trustees.”
– Copyright The Financial Times Limited 2016)
