Ireland’s pensions regulator has launched a consultation on the future regulation of defined contribution (DC) master trusts with a view to encouraging consolidation in the sector.
In a document published today, the Pensions Authority warned that there were “far too many pension schemes that are delivering poor outcomes for members”.
“The Authority would like to see a smaller number of larger schemes to provide for future saving,” it added.
Combined with the implementation of IORP II rules – which are due to bring in additional governance requirements for pension schemes and their trustees – the Pensions Authority said it expected an increase in the number of DC master trusts operating in Ireland.
In its consultation, the regulator laid out a number of proposed requirements for master trusts, their backers and their trustees.
Each new master trust must have a trustee board with a minimum of two members, the majority of whom must be independent from the scheme, its owner and any service providers.
The board must put forward a “detailed and comprehensive” three-year business plan for the master trust, showing income and expenditure forecasts and demonstrating that the trust “has a reasonable prospect of being viable under all scenarios”.
The trustee board – which should be set up as a “designated activity company” – must be “sufficiently capitalised”, the Pensions Authority said, with access to enough cash for two years of operations without additional injections. The regulator did not specify a figure for this, but said it planned to review each master trust’s financial position annually.
“Given their potential scale and inherent complexity, the Authority will consider master trusts to be in the highest risk category for supervision and specific reporting requirements will be in place,” the regulator stated.
Other proposed requirements for master trusts included written policies on engagement with members and employers, conflicts of interest, transparency of charges, and winding up the trust.
The proposed reforms come as Ireland’s government is exploring a wide range of pensions and welfare reforms, including changes to the state pension, new protections for defined benefit schemes and members, and the introduction of automatic enrolment.
The Pensions Authority is seeking responses by 5 October. The full paper is available on the regulator’s website.