Ireland’s regulator has said pension funds should be subject to new minimum standards before they are launched, as it unveiled a consultation paper recommending a “rationalisation” of the number of active schemes.
The consultation paper, which the Pensions Authority said earlier this year would form the basis of a submission to the government on the country’s future regulatory architecture, also proposed stricter standards for trustees and providing fund members with better information about their savings.
Launching the paper, minister for social protection Leo Varadkar said the proposals to simplify pensions were vital “to successfully deliver a universal supplementary pension system”, a reform long promised but yet to be delivered.
Varadkar said the universal system was an “essential objective” for his department, which has been working on proposals since the Universal Retirement Savings Group was launched by his predecessor in February last year.
The Authority’s paper spoke of the need for authorisation of any future scheme launch, with the process examining a fund’s governance, administration and financial set-up.
The paper said the arrangement would allow the Authority to “perform a gatekeeper role”, ensuring new schemes could provide good outcomes for members.
It also proposed enhanced standards for trustees in line with the revised IORP Directive and warned that academic qualifications would not always be sufficient.
Instead, it urged that any fund have at least two trustees, with one possessing the required academic experience and the other having served as a trustee for a set period of time.
On consolidation, the Authority recommended that any master trust launched in the market be subject to a number of additional requirements – including minimum capitalisation, independent trustees and policies on asset management charges.
David Begg, chairman of the Authority, said there was a “serious concern” about the efficiency of the Irish defined contribution (DC) market, which informed the proposals put forward.
“It is the Authority’s view that changes to the current system are needed to address the existing shortcomings so pension savers better understand their pensions and the decisions they need to make, and achieve better value for money,” he said.
“The objective of such changes is to create a pension system fit for purpose and underpinned by good governance principles.”
The head of the Authority, Brendan Kennedy, has long spoken of the potential benefit of discouraging small-scale DC schemes, and questioned whether a market the size of Ireland required any more than 100 schemes.
The consultation closes on 3 October.