Discretionary pension increases are very common in Irish defined benefit (DB) pension schemes. In many cases, there is not a well-articulated policy for the award of these pension increases. Willis Towers Watson has worked with many companies and trustees to develop a policy for the future award of pension increases, striking an appropriate balance between affordability and being fair to all members of the pension scheme by considering sustainability and equity.
Irish pension schemes are becoming very mature with large pensioner populations. This means that the financial implications of awarding a discretionary pension increase can be very material to the overall finances of the pension scheme, making it more important than ever for companies and trustees to have a well thought out policy for the future award of pension increases, considering:
- The future evolution of the pension scheme funding level
- The balance between future investment de-risking and the award of discretionary pension increases
- Inter-generational equity between current and future pensioners so that all groups of members are treated fairly.
We have developed innovative software and decision charts to assist companies and trustees with the development of a suitable discretionary pension increase policy.
