Ireland’s pension trustees face an “onerous” compliance burden to prepare for IORP II’s implementation in January, according to consultants and regulators.

The Pensions Authority, Ireland’s regulator, published guidance for trustees earlier this week detailing the new requirements that the EU rules will bring in. The Irish government has yet to publish its plan for integrating IORP II into local law.

The new rules include “fit and proper” tests for trustees, written policies on key areas of risk management and outsourced services, and minimum standards for communication with members.

However, Ireland’s comparatively small pensions sector could find it difficult to meet IORP II’s “quite onerous standards” in the three months left before the law comes into force, said Roma Burke, partner and actuary at LCP in Ireland.

“Trustees are expected to meet regulations, understand their duties and discharge them with reference to the various frameworks – that’s going to require a lot of written policies,” she said.

“It reminds me of GDPR, where there was a rush to get things done.

“This is a significant enhancement of the regime that sets people up on a higher level and needs a one-off significant effort.”

Ireland’s relatively small population – at 4.8m it is the 20th biggest out of the 28 EU member states – meant schemes tended to be smaller and less well resourced, Burke added.

“This will probably go above and beyond what most trustees are used to, and we’d expect significant costs for trustees to comply,” she said.

Colum Walsh, deputy head of compliance at the Pensions Authority, added: “Larger schemes are doing it all already, but it is the smaller schemes where trustees have a lot more challenges. A lot of it is very, very new.”

“The game has shifted, from needing a broad understanding of governance, to requirements enforced through legislation”

Colum Walsh, Pensions Authority

The Pensions Authority’s existing guidelines for defined contribution (DC) funds are mostly voluntary and do not carry punishments for non-compliance. Current trustee standards set “quite a low bar”, Burke added, ruling out only people who have been declared bankrupt, convicted of fraud, or barred from being company directors.

“Now we’re moving to an environment where there are fit and proper requirements,” she said. “Trustees will have to look at themselves and their colleagues and make sure they are fit and proper and manage that on an ongoing basis.”

Smaller schemes

Walsh told IPE that the smallest schemes could be exempt from the rules – but this would depend on how the government implements IORP II.

Article 5 of IORP II allows for member states to exempt schemes with 100 members or fewer from the most onerous of requirements. Ireland chose this option when implementing the first IORP directive in 2003.

“The industry has the same expectation this time round but we can’t say for certain,” Walsh said.

The regulator recently launched a consultation on the future regulation of DC schemes with a view to encouraging consolidation – and Walsh said the increasing regulatory burden was one reason for this move.

He added: “A number of [schemes] are doing well but they haven’t engaged on this level before. For schemes that haven’t looked under their own bonnets at how to mitigate risk, that’s going to be a shift.”

The regulator

Walsh also highlighted the challenges facing the Pensions Authority as it prepared to enforce the new rules.

“We’ve probably been more reactive in the past, which is reflective of our legislation,” he said. “The enhanced expectations on trustees and evolving regulations lead to higher expectations.”

Ireland’s pensions regulation was “principles based” prior to IORP II, Walsh added. While the details of the changes depended to some extent on how the government fitted IORP II into legislation, he emphasised that “the game has shifted, from [needing] a broad understanding of governance, to requirements enforced through legislation”.

The Irish government has stated that it would implement IORP II as part of its ambitious overhaul of the pension system.

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