2017 has proven to be something of a fallow period in terms of developments in Irish pensions law. This is somewhat surprising given the amount of public discourse and analysis, both at the Ministerial level and among sectoral interests, over the past 12 months. Nevertheless, the calendar year appears to be coming to a close without any substantive legislative amendments being introduced by the Government in the pensions area.
However, a number of anticipated developments are on the horizon (some long in gestation) that are likely to have significant implications for the Irish pensions industry in 2018.
Employer Debt Legislation
- When enacted, the Social Welfare, Pensions and Civil Registration Bill 2017 (the “Bill”) is expected to result in the introduction of a form of employer debt legislation for the first time in Ireland.
- The General Scheme of the Bill was published in May and included a number of provisions designed to protect members of defined benefit schemes. In particular, there was:
- a requirement for employers to give at least 12 months’ notice to trustees before ceasing contributions to a defined benefit scheme;
- where a relevant scheme is in deficit, the employer would be required to engage with the trustees during the 12 month notice period to agree on a schedule of contributions to restore the scheme to solvency; and
- if there was a failure of the part of the employer to engage, the Pensions Authority would have the power to impose a schedule of contributions which would stand as a legislative debt on the employer.
- Despite appearing to have significant political support, these provisions were subsequently dropped from the long form Bill when it was published in July. The Minister for Employment Affairs and Social Protection has since indicated that the intention is to introduce amendments at committee stage to include similar protections, although the exact form that they may take is still unclear.
- The Bill was due to be considered by the Select Committee on Employment and Social Protection at the beginning of November, but we understand that it is still not ready for Committee stage. Latest reports indicate that it will be early 2018 really before this draft legislation progresses any further.
The Transposition of Directive 2016/2341 (the “IORPs II Directive”) into Irish law
EU Member States are required to transpose the IORPs II Directive into national law by 13 January 2019. It is expected that amendments will be made to the Pensions Act 1990 during the course of 2018 to bring the IORPs II Directive into force. Indeed, the Pensions Authority is currently engaging with relevant stakeholders in order to understand the practical issues involved and help formulate their recommendations to the Department of Employment Affairs and Social Protection in relation to the transposition of IORPs II.
In particular, the precise effect of the following requirements will be determined by the implementing legislation:
- Derogation from the Directive: The requirements of the IORPs II Directive are “proportionate to the nature, scale and complexity of the IORP”. The extent, if any, to which smaller Irish pension schemes (ie less than 100 members) will be exempted from some of the Directives requirements has yet to be decided.
- Funding requirements for cross-border schemes: the Directive appears to allow for periods of underfunding provided the trustees ensure that member benefits are “adequately protected”. While it remains to be seen exactly how this provision will be interpreted under Irish law, cross-border schemes could become a more feasible and attractive option for certain employers.
- Trustee qualifications: the precise nature of the collective professional qualification requirements in respect of Irish trustees and how this may impact existing lay trustee boards.
- Member communications: Member States have been given scope to determine the exact information to be required, subject to certain minimum requirements, which is welcome. However, the extension of a requirement to issue benefit statements to deferred members will pose logistical challenges for many schemes.
The General Data Protection Regulation (“GDPR”)
The GDPR will be one of the most wide ranging pieces of legislation passed by the EU in recent times. It will have direct effect in Ireland from 25 May 2018 and will replace the current national data protection legislation. To better understand the changes that the GDPR will bring to how pension schemes are operated in this jurisdiction, we refer you to our article in this edition of our Pensions Update.
In September Taoiseach Leo Varadkar announced that the Government will publish a five year roadmap for pension reform before the end of the year. This will include introducing an auto-enrolment pension scheme for private sector workers, two thirds of whom currently have no occupational pension to supplement their State pension.
The cost estimates, key features, provisions, design and potential phase-in timeframes of the proposed five year roadmap are as yet unknown. However, the Universal Retirement Savings Group (the “URSG”), which was established as an inter-Departmental group in 2015, has been in consultation with stakeholders concerning the introduction of a new, universal, supplementary workplace retirement saving scheme for some time now. The formal policy output from the URSG’s consultation process is still awaited although we understand that they are still working to prepare legislative proposals for the Government.
The Taoiseach further declared that the legislation would be prioritised during the lifetime of the current Dáil, stating that he expected the first such payments to be made by 2021. Whether we see any legislative developments in this space during 2018 is unclear but it is something that is clearly on the Government’s agenda.
Access to Approved Retirement Funds (“ARFs“) for Defined Benefit Pensioners
In response to a recent Dáil question concerning the status of pensioners facing a wind-up of a scheme being unable to access ARFS and instead being given little option but to purchase expensive annuities, the Minister for Employment Affairs and Social Protection Regina Doherty replied that she agreed with the statement. The Minister then announced that the issue is to be referred to the Minister for Finance for review.
Minister Doherty also declared that within the next few weeks the Government “will launch a public consultation on what will probably be the most far reaching reform of the private and public pensions industry”. The Minister has stated that this consultation will not take any longer than 3 months, “because otherwise it is not worth doing”. The issue of extending ARF access is to be included in that process.
Given the fairly unequivocal nature of Minister Doherty’s pronouncements on this matter, it would appear that a further extension of access to ARFs may be forthcoming during 2018.
Reforming the Minimum Funding Standard
Following a request received from the then Minister for Social Protection Leo Varadkar in February 2017, the Pensions Authority is currently engaged in a process of reviewing the feasibility of amending the minimum funding standard and the establishment of a pension protection scheme.
A report is expected be delivered to the Minister for Employment Affairs and Social Protection early next year, which may prompt some legislative change in this area in 2018.
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