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EU Directives

Dáil Éireann Debate, Tuesday - 19 February 2019

Tuesday, 19 February 2019

Ceisteanna (44)

Willie O'Dea

Ceist:

44. Deputy Willie O'Dea asked the Minister for Employment Affairs and Social Protection her plans for the EU IORP II directive; if a derogation for smaller and single member pension schemes will be applied for; and if she will make a statement on the matter. [8051/19]

Amharc ar fhreagra

Freagraí ó Béal (6 píosaí cainte)

The directive is designed to protect the beneficiaries of pension schemes by requiring better qualifications among trustees and controlling how the money is to be invested. A derogation is possible, but has the Government set its face against the notion of one for smaller and single member pension schemes and, if so, why?

The transposition of the IORP II directive will result in significant improvements in the regulation and governance of funded occupational pension schemes in Ireland. While the directive provides for the possibility of a derogation from specific articles for smaller schemes, members of smaller schemes should have the same protections and oversight as members of larger ones. Money saved for pension purposes should be properly protected to ensure people have adequate income for their retirement years. The value of investments held in many schemes fell substantially during the financial crisis. This highlighted the need for stricter regulations and greater protections, especially for small schemes investing in riskier unregulated markets.

It has been suggested single person pension schemes should be exempt from the application of IORP II rules on the basis that the scheme members are competent in the management of their own affairs and that the governance requirements are unduly onerous. However, Ireland has a far larger number of small schemes than any other EU state and the Government shares the European Union's concerns about such small schemes, particularly in the protection of consumers and the money they have invested, the riskiness of these investments, the charges that apply and the standard of governance. Accordingly, the Government has decided that the provisions of the directive should apply to all funded occupational pension schemes.

The application of the directive is prospective, not retrospective. This means that existing investments and borrowings can remain in place. After the transposition, no single member scheme, including small self-administered ones, which are the only schemes currently allowed to borrow, will be allowed to enter into new borrowing arrangements, except for short-term and liquidity purposes. All of their future investments will have to be made in accordance with the investment rules included in the directive.

Officials in my Department, supported by the Pensions Authority, are managing the transposition process of the IORP II directive. It is a substantial directive and the preparation of regulations to transpose it is at an advanced stage. It is expected that transposition into Irish law will be achieved before the end of March.

Is the Minister aware that, under the IORP I directive which was designed to do the same thing, the then Government agreed to a derogation for this type of scheme, in particular, on the basis that a one-size-fits-all model did not work? Is she aware that her colleague in the European Parliament, Mr. Brian Hayes, MEP, confirmed at a meeting on 29 January with the association representing these schemes that the Government had a clear and strong view on the terms of the directive to the effect that there must be maximum flexibility in how schemes were managed so as to be able to make special provision for one member arrangements? He went on to say and allowed the association to reference him that the reason for the derogation was Ireland had championed and supported it. The Minister's colleague in the European Parliament has pointed to why there should be a derogation from the directive, yet the Government is choosing not to implement one. The Minister has stated people must be protected from mismanagement of their funds, but is she aware that the pensioners in one member pension schemes make the decisions? They have not sought protection against their own decisions. Is the Minister aware that the Government's approach eliminates freedom of choice and will have an impact on, for example, investment in housing, an area in which some of the schemes are the main investors and where the Government has committed to providing more housing?

To answer a number of the Deputy's questions directly, I am aware that the then Minister Séamus Brennan granted a derogation. I do not agree with the Deputy's description of what that derogation achieved. During the financial crisis many large and small investment pension schemes suffered significantly not only because of the years-long disaster but also because of the lack of regulation and governance.

We intend to ensure that the new governance measures will relate to everybody equally. With respect to Brian Hayes, MEP, he is entitled to his opinion but as long as I am sitting at this desk I will make the decisions on the basis of the best evidence and advice that is given to me. That is what I have done in this case.

With respect, the Minister has not got the best advice. She is talking about protecting people from themselves. People here make the decisions and I suggest to the Minister that the only consequence of not allowing a derogation here, as was arranged by Brian Hayes in Europe, is that these people will be driven into the hands of the larger companies where there will be less transparency and much higher charges. I ask her to reconsider that decision because it will prove counterproductive in the medium to long term.

All I can say respectfully to the Deputy is that I note his comments but the decision has already been made. We are well advanced in our work to transpose this directive and we will have it done by the end of March.

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