Ireland to transpose IORP II Directive before the end of 2020 – Pensions Regulator

Ireland is expected to transpose the long overdue IORP II Directive by the end of 2020, its Pensions Regulator, Brendan Kennedy, has stated.

Publishing a statement alongside The Pensions Authority’s annual report and accounts, Kennedy said that the transposition will lead to the “most significant changes in at least a generation”.

“Transposition of IORP II into Irish pensions law is a very complex task and has taken longer than anyone expected. As a result, we have not been able to communicate the details of the forthcoming changes as soon as we would have wished. However, there can be no doubt that significant change is coming to Irish pensions, and the nature and direction of that change is clear. The authority is well advanced in preparing for these changes,” he said.

Acknowledging that there are well-run pension schemes in Ireland, which will have little difficulty adapting to the new regulations, he warned that there are many schemes that are not run to the standard that members expect.

“It should not be a matter of luck for a member how well run their scheme is. Furthermore, given the significant value of pensions savings that can be built up by retirement age, there is no justification for the standard of care for pensions savings being any less than it would be for any other type of savings,” he said.

Under the new regulations, trustees will be obliged to demonstrate their focus on members’ interests. This means that they must satisfy themselves and the authority that they have the expertise, commitment, professional support and structured approach needed to fulfil their responsibilities to their members.

“Perhaps more importantly, they must demonstrate that they are actively managing their scheme and anticipating issues that might affect their members. Any trustees whose sole or primary focus is on compliance will not be doing enough,” the regulator said.

The new regime will also specify the obligations of trustees in detail. Although in the best schemes, these obligations are already being met, for many schemes, this is not so and much change will be needed, the regulator said. However, the authority believes that all scheme members are entitled to the same level of protection, whether in large or small schemes. Kennedy believes that larger schemes are in a better place to provide protection to members than smaller schemes.

He also warned that IORP II will present a significant challenge for many defined benefit schemes. As well as the additional governance obligations that will apply to all schemes, defined benefit trustees will be obliged to prepare and examine a much wider range of financial and actuarial data, and to demonstrate that they understand and are managing their scheme so that members have a reasonable chance of receiving the benefits set out in the scheme rules.

“At present, schemes are obliged to comply with the funding standard rules, but these rules do not sufficiently reflect the uncertainty and complexity of these schemes, and there is no requirement for trustees to demonstrate that they have considered and assessed the full range of relevant issues. The new obligations that will result from IORP II will go a long way to ensuring that members are more likely to receive their benefits and that unachievable promises are identified in good time.

“The authority will be adopting a policy of forward-looking risk-based supervision with the objective where possible of prevention of threats to the interests of pension scheme members. As a result, the authority’s oversight will be much more interventionist. We recognise that trustees and their advisers will need to understand their new obligations and the expectations of the authority in considerable detail. Communication will be an important part of the Authority’s work in coming years, especially in the immediate aftermath of the IORP II transposition,” Kennedy noted.

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