The IORP II Directive, the EU’s pension fund legislation, has been transposed into Irish law – more than two years after the intended deadline.
The development was announced by the government on Tuesday, which said that the general principle in respect of the transposition was that ”the requirements of the Directive will apply to all schemes and trust Retirement Annuity Contracts (RACs), including small schemes and one-member arrangements, where possible and as appropriate, in order to ensure that all members and beneficiaries are afforded equal protection irrespective of size”.
Heather Humphreys, minister for social protection, said many of the provisions in the IORP II Directive would support positive reform of the Irish occupational pension sector, in keeping with the government’s plans.
Jerry Moriarty, CEO of the Irish Association of Pension Funds (IAPF), said the transposition – “finally” – was welcome, but there was still some waiting to be done to get further clarity.
“Further guidance and a code of practice from the Pensions Authority will also be required in order to outline the practical implementation of the Directive,” he said, adding that the IAPF had some concerns about the additional costs that will be incurred by schemes.
“This is particularly an issue for smaller schemes which may result in employers ceasing pension provision,” he said. “However, we note that there is scope in aspects of the regulations to have regard to the size, nature and complexity of a scheme and this should allow for a proportionate approach to be taken.”
In an overview of the IORP II transposition, Conor Daly, partner at consultancy LCP, wrote that a considerable amount of work will be required from many schemes to achieve full compliance in the area of governance.
It was notable, he said, that there was no derogation for small schemes in relation to governance requirements, except for a five-year derogation for one-member schemes that are already in place.
New investment regulations, however, apply with immediate effect for all new one member schemes and for all new investments for such schemes already in place.
One-member pension schemes are a very material market in Ireland.
“Some of the difficulties for Ireland with IORP II was that the Directive was designed with some of the larger schemes in mind, with staff in their own right, whereas in Ireland there’s a much broader base,” Daly told IPE.
“It is important to recognise the significance of these changes for Irish pensions”
Pensions regulator Brendan Kennedy
The Pensions Authority has outlined a timetable for delivery of further information and guidance, including publication of a draft code of practice, for consultation, in the week commencing 19 July, a final code in November, and guidance on minimum standards to be expected from master trust vehicles in December.
In the week starting 10 May the Pensions Authority plans to publish an overview, including how it will oversee IORP II compliance and the effect of derogations and transitional periods.
Grace Guy, head of supervision and enforcement, said: “The Authority recognises that trustees and their advisers will need to fully understand their new obligations and the expectations of the Authority.”
Pensions regulator Brendan Kennedy, said: “It is important to recognise the significance of these changes for Irish pensions. The objective is to improve the outcomes for members of Irish pension schemes, but many schemes will need to do a lot of work to meet the standards and obligations set out in these new provisions.”
The supervisor has been working to recruit extra staff to help with IORP II implementation. Ireland was one of 17 EU countries against which the European Commission launched infringement proceedings in April 2019 in relation to the Directive.