Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision (IORPs) ("The IORP II Directive"), sets out minimum standards for the management and supervision of pension schemes, with the objective of ensuring the soundness of occupational pensions and better protections for scheme members and beneficiaries across the European Union. These EU wide standards are binding objectives to be achieved by Member States. The provisions of the IORP II Directive therefore applies to all funded occupational pension schemes and trust Retirement Annuity Contracts (RACs) operating in Ireland. The Directive was transposed into Irish law by way of the European Union (Occupational Pension Schemes) Regulations 2021 (SI No. 128 of 2021) on 22nd April 2021.
The general principle followed in respect of the transposition of the Directive, in keeping with the Government’s Roadmap for Pensions Reform, is that the requirements of the Directive have been applied to all schemes and trust RACs, where possible and as appropriate, in order to ensure that all members and beneficiaries are afforded equal protection irrespective of the size of the scheme. In relation to existing one-member arrangements, post-transposition, IORP II investment and borrowing rules will apply only to new investments or borrowings entered into by such arrangements. Furthermore, for these existing one-member arrangements, a five-year derogation has been provided from all other new IORP II requirements.
With 160,000 occupational pension schemes in the country, Ireland is a significant outlier with many more small and single member schemes than any other European country. Reducing this very large number of schemes will help to improve the overall standard of scheme governance and to reduce overall pension costs and risk for members. Scheme consolidation is a stated aim of the Roadmap for Pensions Reform 2018 – 2023.
It is acknowledged that, in the future, Master Trusts will serve as a model for a significant portion of the Irish pensions market and trustees of smaller schemes may choose to transfer their members into such an arrangement. Master Trusts are multi-employer pension schemes under the governance of a single trustee board. It is anticipated that the consolidation of existing schemes into Master Trusts arrangements may offer certain advantages to employers and pension savers including increased economies of scale, higher scheme governance standards and levels of security and could potentially reduce administrative costs for such schemes. Ultimately, it will be up to scheme trustees and sponsoring employers to decide on the pension arrangement that best suits their needs and provides the optimal result for their members. My Department has no input or role in relation to such decisions and cannot predetermine any choices made by trustees and employers in respect of their individual pension schemes.
With regard to any prospective deadline, the Deputy may wish to note that the supervision of compliance with the requirements of both the Directive and the Pensions Act overall is the responsibility of the Pensions Authority, which is the regulator for pensions in Ireland.
I hope this clarifies the position for the Deputy.
