As of 2012, there were 990 defined benefit pension schemes in Ireland, serving just under 200 000 members. In 2012 a large number of members of these schemes were told that the schemes would be winding up and that the members would no longer be receiving their promised benefit because the pension scheme was to wind up.
The pension schemes found themselves in a situation where there were insufficient assets to meet the future liabilities and had therefore become insolvent. The schemes had an amount of assets only able to cover a certain percentage of the total liabilities.
This news had little effect on those already receiving their pension because they were entitled to 100% of their promised benefit by law.
The active members of the scheme were the most hard struck by this news because if, for example, the scheme had enough assets to fund 80% of the liabilities but there were 20% of the members already retired and earning their guaranteed benefits, this left the remaining active members with assets in the scheme to cover significantly less than 80% of their promised pension.
In summary, active members were losing a large portion of their promised benefits whilst current pensioners felt no brunt of the scheme’s insolvency.
This issue can be further magnified by observing (another example) that an employee who retired in 2012 could receive full benefits, but his colleague (due to retire in 2013) will only receive 60% of his pension, thus posing a serious threat to his wellbeing in retirement because it has become too late for him to recoup his costs.
This issue raises the question of whether the law regarding the priority of DB pension recipients is fair and/or relevant. Additionally, are DB funds a viable product for the future, after considering improving longevity?
Here are some further readings on the development