Ireland’s Pensions Regulator, Brendan Kennedy, explains why the consolidation
of Ireland’s 150,000 pension schemes is a priority for the Pensions Authority
Irish occupational pensions are going through a period of unprecedented change, triggered by the transposition of the IORP II Directive and the Irish government’s 2018 Roadmap for Pensions Reform. The objective of these changes is to improve significantly the consumer protection for pensions savers and beneficiaries.
In April 2021, the Minister for Social Protection signed the regulations that transposed the IORP II Directive into Irish law. These changes imposed significant additional obligations on Irish occupational pension schemes and committed the Pensions Authority, which is responsible for the supervision of Irish pensions, to implementing forward-looking, risk-based supervision.
The particular challenge for the Irish pensions sector is the number of pension schemes: there are over 150,000 pension schemes. Almost all of these are single employer schemes, and the great majority are single member arrangements. Although the transposition provisions allowed a five-year derogation for pre-existing single member arrangements, there are obviously enormous challenges ahead for the Irish pensions sector.
These challenges can be summarised as follows: The obligations of IORP II are almost certainly too onerous and costly for small pension schemes; there are not enough trustees with the required experience and qualifications to manage the existing number of pension schemes, such a large number of pension schemes results in duplication of administration and governance and is an obstacle to achieving efficiency and value for money, and, applying forward-looking, risk-based supervision to such a large number of schemes would be extremely difficult.
Consolidation of Irish pension schemes is therefore a priority for the Pensions Authority. Multiemployer master trusts are expected to be an important part of future pension provision in Ireland. The authority’s immediate focus is on ensuring that master trusts are compliant with all of their obligations.
Few if any existing occupational pension schemes were wholly compliant at the transposition date. The trustees of these schemes and their sponsoring employers must decide as quickly as possible whether to take the necessary steps to achieve compliance or whether consolidation into a larger scheme is a more appropriate response.
It is important that the implementation of these reforms happens as soon as possible. The long-term, multi-generational investment of retirement savings has always been a profound and often underestimated challenge, and the environment for those managing pensions savings is as complex as it has ever been. The ongoing transfer of risk from schemes or employers to individual savers, the investment dilemmas presented by climate change, the need to ensure value for money, the role of advice and information for savers: these are all issues that need to be addressed as quickly as possible.
The objective of our reforms is that those running pension schemes will have the necessary qualifications, experience, processes and advice to take the appropriate steps and make the best decisions on behalf of members and beneficiaries
Recent Stories