The Pensions Board has begun a major consultation exercise on the funding standard of the State's 1,541 defined-benefit pension schemes, writes Dominic Coyle

Around half of all Irish occupational scheme's are failing to meet the current funding standard, which broadly requires schemes to have sufficient funds to meet their liabilities should they be wound up.

The growing difficulty for pension schemes in meeting the current funding standard led the board to open a review of the standard. It is now seeking the views of all interested parties on the issue. Submissions should be sent to the Pensions Board by September 10th.

In its consultation document, the board examines why the current standard has become so challenging for defined-benefit schemes, addresses the objectives of a funding standard and considers a series of options.

The chief executive of the Pensions Board, Ms Anne Maher, said yesterday that the purpose of the public consultation was to seek as wide a range of views as possible on the most effective funding standard for the future.

She pointed out that the board, which supervised defined-benefit schemes, was balancing the need to safeguard the benefits of pension fund members with the aim of encouraging companies to preserve their defined-benefit schemes.

"If a funding standard provided absolute security to members, it would be so demanding and inflexible that it would be likely to end defined-benefit scheme provision," she said.

Equally, a looser standard might imperil accrued member benefits.

The consultation document says that the Pension Board is minded to maintain the current funding standard, together with the recently introduced provision allowing the board to grant underfunded pension schemes up to 10 years to get their funding back in order.

The report says many funds found themselves in trouble when the tech bubble burst because they had used surpluses accumulated during the extended bull market to improve member benefits or permit a break in contributions.

It says there has been a dramatic rise in the number of funds failing to meet the current standard. In 2003, 408 of 484 funds reviewed met the standard. This year to date, just 130 of 224 funds reviewed have.

Roughly two-thirds of funds not meeting the requirements expect to do so within the three-and-a- half years permitted in the original funding rules. However, the balance have sought more time under the new provisions.

The board says that all funds looking for extensions are citing investment losses. However, it said very few had reduced member benefits or increased member contributions.