The Pensions Authority has stated that “significant consolidation” of Irish pension schemes is the only practical means of achieving high standards of management, good value for money and effective supervision.

As it published its annual report and accounts for 2021 this morning, the regulator said that other than those schemes allowed until April 2026 to comply, the trustees of all pension schemes should by now have assessed whether it is practical and in their members’ interests to continue their current pensions arrangements.

“If not, they should be taking concrete steps to transfer their members’ savings to compliant pension arrangements. The Authority is in close contact with administrators and master trusts to monitor this process,” said chief executive officer Brendan Kennedy.

“The recent economic shocks and the significant movements in stock markets and interest rates are a reminder of the challenges of investing for the long term. Pensions investment must take account of the near certainty of such disruption over the course of savers’ working lifetime and into retirement,” he added.

He noted that such investment must, therefore, specifically address issues of risk and liquidity, and not merely make simple assumptions about long-term outcomes.

“The management and oversight of investment and investment risk is an important part of trustee responsibilities and will be an important part of their own risk assessment, and of the Pensions Authority’s scheme specific supervisory review process, both of which are obligations introduced as a consequence of IORP II [Directive],” he said.

Brendan Kennedy at The Pensions Authority

Brendan Kennedy

The objective of the transposition of the Directive is improved consumer protection and better outcomes for members of Irish pension schemes, he explained. The specific intended outcomes are good value for money, appropriate investment and risk management and improved member communications.

“Responsibility for member outcomes rests unambiguously with scheme trustees. Though most trustees outsource much of the work involved in running their scheme, the responsibility and accountability remain at all times with them,” Kennedy said.

The effect of transposing of IORP II into Irish pensions legislation is to set out clearly the higher standards of management and governance expected of trustees. Trusteeship is a significant and demanding responsibility, and not everyone will be willing or able to meet the obligations involved, he added.

Kennedy noted that IORP II involves change for almost every occupational scheme and its trustees, adding that 2022 is still a period of transition for many schemes.

“The Authority recognises that many people, trustees, administrators and advisors, are working very hard to make schemes compliant. Much has been achieved but, in some cases, there has not been as much progress as the Authority would have expected, and it is clear that sometimes this is because the process was not started soon enough. It may also be that some trustees underestimated the gaps between what is now required and what has been their usual practice,” he said.

The regulator has now begun a process of auditing compliance of newly-established one member arrangements with their Pensions Act obligations, with particular focus on the new IORP II obligations. Where non-compliance is identified without any evidence that serious remedial actions are in train, the Authority will consider all available options to secure compliance.

The transposition regulations allowed pre-existing one member arrangements until April 2026 to comply with most new IORP II obligations. Kennedy expects remaining schemes to be compliant by the beginning of 2023, and this work should be well underway.

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