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Tuesday, 16th April 2024
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Pensions are too complex Back  
Gerry O’Carroll says that the pensions industry has become too complex and too highly regulated.
Since 1987 pension funds have grown at a rapid pace due to rising share values, increasing employment and maturing workforce participation under occupational pension schemes. Legislation has also had to keep pace with the demands of guarding the nation's pension fund wealth. Consequently, we have witnessed a massive growth in the number of people working for actuarial firms, administration companies, life offices, and investment houses etc all clamouring to provide services for a fee or in some cases for a commission. In 1987, Watson Wyatt would have employed four staff/partners and we now have close to 60 associates.

In order to prosper, pension funds have to generate competitive returns, produce enough income to pay benefits, remain solvent, be compliant and if possible produce surplus in order to enable contribution reduction and/or benefit improvements. There is little doubt that globalisation continues to dictate the development of the pensions industry with the speed of change accelerating each year.

Technology seems to have created a license for legislation and complicated structures to be unleashed without regard for cost, over regulation and ultimately the ‘straw that breaks the camel’s back’. It is baffling that in a market where the call is increasingly for deregulation, we are finding the pensions field is fast becoming over regulated.

In summary, the last fifteen years have seen us move from too little to too much in the area of regulation, from a simple world to a very sophisticated one in the area of investment, from very few products to a multiplicity, from simple tax regulation to Pensions Board/Ombudsman/Central Bank etc in the area of reporting, from a workforce of a single discipline workforce to a multi-disciplinary set of atypical workers. Add to this, the move from paternalistic employers to empowerment and you immediately get the drift that life in pensions is no longer comfortable and unexciting.

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