I propose to take Questions Nos. 633 and 634 together.
The Government's Roadmap for Pensions Reform 2018 -2023 launched in February 2018 detailed specific measures that will modernise our pension system. It includes plans for reform and simplification of occupational and private pensions. Transposition of the Directive is a key part of the Government’s Roadmap.
Transposition of the IORP II Directive will support positive reform of the Irish funded occupational pension sector. Transposition will raise governance standards, improve trustee qualification and suitability, and increase supervision through enhanced powers for the Pensions Authority.
In 2014, the Department undertook an open public consultation on the IORP II Directive. Further to that, the Pensions Authority undertook a consultation process on the reform and simplification of supplementary funded private pensions in 2016. In addition, officials of my Department have engaged on the provisions of the Directive with numerous representatives and stakeholders over a number of years.
My Department, supported by the Pensions Authority, conducted detailed analysis on the implementation of the Directive.
While the Directive provides for the possibility of derogation from specific Articles for smaller schemes, I believe that members of smaller schemes should get the same protections and oversight as members of large schemes. Money saved for pension purposes should be properly protected to ensure that people have adequate income for their retirement years. It should be noted that Member States must apply certain provisions concerning investment rules and the system of governance to schemes which have more than 15 members.
The Pension Authority advises that there are 100,000 single member schemes and that 98% of these schemes are already compliant with the investment rules of the IORP II Directive. Those not compliant will not be obliged to change existing investments and borrowings.
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 value of investments held in many schemes fell substantially during the financial crisis. This emphasised the need for stricter regulation and greater protections, especially for small schemes investing in riskier unregulated markets. Concerns in relation to this sector are particularly around the protection of the consumer and the money they have invested, the riskiness of 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.
I hope this clarifies the matter for the Deputy.