If you are an employer with your own pension scheme, there are significant decisions you will have to make this year as new legislation introduces the most significant changes to occupational pension schemes, their management and regulatory framework in at least a generation.
Last year, The European Union (Occupational Pension Schemes) Regulations were signed into law in Ireland in a bid to reduce the number of individual pension schemes and consolidate them into larger schemes to streamline regulation. Following consultation, the Irish Pensions Authority subsequently shared a Code of Practice for Trustees for Occupational Pension Schemes. From the beginning of 2023, the focus of the Authority will be ensuring full compliance with all obligations under the amended Act.
As an employer these are the key things you need to be aware of:
Key dates for new occupation pension requirements:
- 31st January 2022 – A Compliance Statement must be produced by all trustees – to be held on record this year and subsequently issued to the Pensions Authority annually.
- 1st July 2022 – New requirements must be fully implemented by Master Trusts and New Pension Schemes put in place, including new pension benefits statements, establishment of the risk management function, internal audit function and the new policy documents.
- 1st January 2023 – New pension requirements must be fully implemented by all single employer trust pension schemes. This includes new pension benefits statements, the establishment of a risk management function, internal audit function and new policy documents in compliance with the new regulations.
What are the implications for employers?
Unfortunately, the cost of running a pension scheme is likely to increase significantly, whether that is through additional professional trusteeship cost, or the cost of your own time as you ensure compliance over the coming year.
Employers operating as a Trustee on their own pension schemes will have a lot of work to do to meet all these new requirements.
Trustees are required to document everything, producing more than 10 policies relating to the operation of their pension schemes, including for example, internal audit, member engagement and communication, conflicts of interest and risk management policies etc.
This will also require a greater degree of formality, including more in depth recording of minutes and greater regularity to Trustee Meetings as well as documenting data sharing activity and quarterly performance reviews. You will be required to create a Statement of Investment Process, to demonstrate how the investment objectives and strategies are to be approached and implemented amongst other items.
If you don’t have the time and internal resources to take this on you may want to look to outsource this function to an external trustee or perhaps ultimately consider a Master Trust.
Master Trusts – what are these and how can they play a role for employer pension management?
Master Trust Sponsors in Ireland are large, experienced insurers or consultancies with a wealth of experience in pensions and access to significant resources and capital.
The Benefits of joining a Master Trust
In terms of Governance a Master Trust can ensure communications and documentation can be streamlined and delivered effectively to all members electronically, considering an array of employers with varying contribution levels, charges, and investment options.
Master Trusts can mitigate against future participating employer costs, such as the requirement for scheme audit and to pay for trusteeship (post IORP II). This may make the engagement with Master Trusts more likely and encourage participation so that employees can access pension saving, including employer contributions, with additional greater scope for their own maximum contributions made based on age-related Revenue bands, unlike PRSAs in their current form. Delivering better long-term outcomes for members, which is ultimately every trustee’s number one objective.
Group Life benefits can in some cases be insured and placed under the Master Trusts, which in theory should professionalise the approach to the handling of death claims, making inclusion of these valuable death benefits more streamlined for the employer, and held in one place for trustees overseeing the payment of pension and death benefits in line with Revenue rules.
The shortcomings of joining a Master Trust
How much say will trustees have if they find charges to be excessive, when set by the Master Trust provider they are working for. Conflict of interest was a critical issue for the Pension Authorities’ 2020 report. Will trustees feel confident that members have access to sufficient advice around planning, investment, and funding?
Is there a danger to having a flat, non-diverse panel of trustees, could a ‘tried and tested’ methodology to decision making run the risk of a small set of approaches being employed over a much larger member pool, as members familial and geographical circumstances become ever more diverse?
Where employers or members wish to have some engagement with the trustees, how could this possibly be facilitated with a very large Master Trust population? Are 5-minute Zoom or Teams calls going to solve this? Speed dating for Employers and Trustees, replacing comprehensive trustee meetings / interactive pension committee and trustee board engagements.
Currently there is a Formal Scheme Wind Up required to move from a Single Employer Trust to a Master Trust. This may change in the coming year, as the Authority seeks to significantly reduce the number of Pensions Scheme operating on a Small to Medium Scale.
If you are a Member Trustee, ensure that you understand all the implications of IORP II’s transposition and the Fit and Proper Standards. If you have not undertaken a 2 recognised Trustee Qualification and you intend to stay on, then you should consider completing one.
The Author of this article is Davin Spollen, Associate Director at Glennon and Director and Council member of the Irish Institute of Pension Management, Executive Board Advisor to the Asinta Employee Benefits Network, Associate of the Irish Institute of Pension Management, Qualified Pension Trustee, specialist Investment Advisor, Qualified Financial Advisor, and an Accredited Product Advisor for Personal General Insurances.
Glennon Employee Benefits and Financial Planning advise companies, their employees, and individuals with regard to their pension arrangements. If you need advice in this area please reach out to Davin and his team, firstname.lastname@example.org or call 017075880.