Irish DB schemes have made “good progress” in meeting the new standards of regulation, the Pensions Authority has said.

In its Engagement and audit findings report 2023, the authority said it continues to engage with large DB schemes and “broadly the schemes the authority met had made good progress in meeting the new standards”.

During the year the authority met with the trustee boards of several large DB schemes, where they focused on schemes’ governance systems. The authority found that progress has been made towards meeting the enhanced governance standards. For example, the schemes had their scheme policies in place, had appointed their key function holders (KFHs) and had a structured approach for their trustee meetings and their decision-making.

All of the schemes that the authority met with had an objective of de-risking the scheme over time, either to address the scheme’s approaching maturity and/or to reduce the reliance on the employer covenant.

Furthermore, all the trustee boards had regular engagement with the sponsoring employer on investment strategy, funding, and the sponsor contribution commitment.

“The authority reminds all DB schemes that regular engagement with the sponsoring employer is required, and the authority reminds trustees that they must give priority to the best interests of the members in such engagements. The authority also expects an evidence-based view of the strength of the sponsor’s covenant to the scheme to form a key component of the trustees’ own-risk assessment,” the authority said.

Trustees have been required to have KFHs in place since 1 January 2023 and to notify the authority of the outsourcing of a key function. A sample audit by the authority found that approximately 28 per cent of DB schemes audited had not appointed KFHs as they were in the process of winding up.

Sixteen per cent had not appointed KFHs as they were undergoing a review process with the sponsor which could lead to scheme wind up. A further 56 per cent had appointed KFHs but had not notified the authority of the outsourcing of the key functions.

In addition, DB schemes will be subject to the supervisory review process in 2024. The authority said it expects all trustees and their advisers to carefully consider these findings and use them as a basis for evaluating their practices and making improvements where necessary.

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