WHAT THE REGULATORS EXPECT WHAT THE REGULATORS EXPECT FROM PENSION FUNDSFROM PENSION FUNDS

Anne MaherChief ExecutiveThe Pensions BoardIreland 23 November 2005

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AgendaAgenda

Why we regulate

How we regulate

What regulators need from the regulated

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Why we regulateWhy we regulate

Because

“Pension funds are set up to serve as a secure source of funds for retirement benefits” (OECD)

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Why we regulateWhy we regulateTo Control commercial relationships between parties

whose knowledge or power is unequal Avoid risk of market failure of a financial

institution Enhance equity, adequacy and security Avoid abuse of any government tax

encouragements Influence pension take-upNot to Thwart good pension provision

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How we regulateHow we regulate Principles or rules based

Heavy or light prescription

Heavy or light supervision

Influenced by historical development

Influenced by national culture

All countries are different

EU Pensions Directive now requires minimum level

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What regulators need from the What regulators need from the regulatedregulated

Governance – to have well run pension funds

Accountability – to supervisor and stakeholders

Communication – to beneficiaries

Funding – to ensure liabilities are met

Co-operation and trust

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GovernanceGovernance Governing body Good repute Identification of responsibilities Understanding of responsibilities Expert advice Independent auditing/actuarial certification Internal controls Good administration/IT support Reporting Disclosure

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AccountabilityAccountability Produce

• Audited accounts• Actuarial valuations• Annual Reports

Make audited accounts / actuarial valuations / annual reports available to• Stakeholders • Regulators

Overall accountability to regulator High standard, timely reporting to regulator

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CommunicationCommunication

Fund information to beneficiaries

Personal information to beneficiaries

All information to be in clear, unambiguous language i.e. communication

Availability of ‘contact’ for beneficiaries

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FundingFunding

Expert advice

Funding plan in place

Regular independent verification

Regular monitoring

Meet regulators funding requirements

Ensure beneficiaries aware of funding position

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Co-operation and TrustCo-operation and Trust

Openness and transparency with regulator

Positive approach to regulation

No ‘avoidance’ of regulation

No regulatory arbitrage

Trust that regulator/pension fund have common objective

Foster trust in pension fund beneficiaries

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ConclusionConclusion

Regulators and pension funds have common objectives

Co-operation will achieve these objectives

TRUST YOUR REGULATOR!

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