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EU Directives

Dáil Éireann Debate, Tuesday - 29 January 2019

Tuesday, 29 January 2019

Ceisteanna (565)

Michael McGrath

Ceist:

565. Deputy Michael McGrath asked the Minister for Employment Affairs and Social Protection the status of the transposition into law of the EU directive on the activities and supervision of institutions for occupational retirement provision, IORP II; her plans to make changes to the provision that single member schemes will no longer be allowed to enter into new borrowing agreements except for short-term and liquidity purposes; and if she will make a statement on the matter. [4060/19]

Amharc ar fhreagra

Freagraí scríofa

The over-arching objective of IORP II Directive is to facilitate the development of occupational retirement savings in the EU. Many of the provisions contained within the Directive will support positive reform of the Irish occupational pension sector. The Directive provides for a range of new requirements concerning governance, management standards in schemes, safekeeping of assets, the need for clear and relevant information to members, the removal of obstacles to cross-border provision of pension services and the facilitation of cross-border transfer of schemes. There are also provisions that will enhance the powers of the Pensions Authority for effective supervision of occupational pensions.

The IORP II Directive was the result of almost three years of discussion and negotiation and came into force on 12 January 2017. Officials in my Department, supported by the Pensions Authority, are managing the transposition process of the IORP II Directive. This is a substantial Directive, and preparation of regulations to transpose the Directive is at an advanced stage. It is expected that transposition into Irish law will be achieved later this quarter. This timeframe is in keeping with many other EU countries.

Codes of practice will be issued by the Pensions Authority following approval of the Minister. The codes will expand on requirements, policies and principles prescribed in the transposing regulations. They will explain in practical detail what the Authority will expect from trustees to demonstrate their commitment to serving the best interests of members, deferred members and other beneficiaries.

To ensure that schemes are informed of their obligations under the Directive, the Pensions Authority will also undertake a communication campaign on the implementation of the Directive. The Authority will engage and consult with industry stakeholders and trustees on implementation of the new regulatory regime and related codes of practice. The emphasis of this engagement will be on providing sufficient support, time and information in order for industry and trustees to plan for and make the changes needed.

While the Directive allows Member States not to apply some of the provisions to smaller schemes, I believe all schemes should be subject to sound protections for pensions and consumers. Money saved for pension purposes should be properly protected to ensure that the saver has adequate resources for retirement years. To exclude small schemes from the provisions of the Directive would be contrary to the policy of enhancing standards for consumers.

Article 19 of the Directive sets out the investment rules for occupational pension schemes. The underlying principle for capital investment is for schemes to invest in accordance with the, "prudent person", rule and the other specific rules set out in the Article. It is recognised that there should be an appropriate level of investment freedom for schemes within prudent limits, and this is reflected in the rules. Assets must be predominantly invested on regulated markets, i.e., at least 50%. This allows adequate scope for investment in instruments with a long-term economic profile and non-listed undertakings such as property and infrastructure.

The application of the Directive is prospective, not retrospective, so these changes will not affect existing investments and borrowings by schemes. From transposition forward, single member schemes will no longer be allowed to enter into new borrowing agreements, except for short-term and liquidity purposes, and all future investments will have to be in accordance with the rules in the Directive. Accordingly, no current investment plans are impacted or jeopardised.

I hope this clarifies the matter for the Deputy.

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