The Minister for Social Protection, Heather Humphreys announced in a press release issued on Tuesday the 27th of April that she has signed the European Union (Occupational Pension Schemes) Regulations 2021. (IORP stands for Institutions for Occupational Retirement Provision). This means that the EU IORP II directive will be transposed into Irish law through the amendment of the Pensions Act 1990.

How will this impact your Executive Pension Plans?

The legislation specifically targets the Administration and Investment Rules for Small Self- Administered Schemes including Executive Pension Plans. While one-member schemes, such as EPPs, have been granted a transitional period of 5 years to adopt the legislated changes, the increased governance and trustee responsibilities required by the rules are designed to bring immediate benefits to consumers.

What are the Administration Rule changes?

The New Regulations

• Cover trustee qualifications where trustees must pass a “fit and proper” test, risk management, auditing and reporting, cross-border activities, solvency and supervision.
• Provide better protection through enhanced governance and risk management.
• Provide clear, relevant and more consistent communication about pension schemes.
• Remove barriers to cross-border schemes.
• Ensure that trustees have the necessary powers and credentials to supervise schemes.
• Small schemes (schemes with less than 100 members) and trust RACs are no longer exempted from the IORP investment rules.

What are the Investment Rule changes?

The change in investment rules are effective immediately. They apply some restrictions to EPP investments as follows:
• Scheme assets must be predominantly invested in regulated markets. This means that direct property investments and unregulated investments will be restricted to no more than 50% of the aggregate portfolio. We await guidance on what this might look like in practice.
• Scheme assets must be properly diversified in such a way as to avoid excessive reliance on any particular asset, issuer or group of undertakings and accumulation of risk in the portfolio as a whole and
• Environmental, Social and Governance (ESG) issues must be considered when making investments.
These conditions apply only to new investments or borrowings entered into by EPPs and are not retrospective.

What is next?

The Pensions Authority will provide further information and guidance over the coming weeks and months, to ensure the new obligations are fully understood. We are working through the changes as quickly as we can with our providers and will update all our clients where appropriate.

If you have any queries regarding how this new legislation may affect your scheme, please contact our office on 046 92 40961.