I want to assure the Deputy that the IORP II Directive will be transposed into Irish law in accordance with the Government Decision of 9 January 2019. Government approved the approach of applying the requirements of the Directive to all funded occupational pension schemes to enhance pension scheme governance and the consumer protection of pensioners, members and future members. Responsibility for the transposition of the Directive lies with my Department.
The over-arching objective of IORP II Directive is to facilitate the development of occupational retirement savings in the EU. The transposition of the Directive will result in significant improvements to the regulation of funded occupational pension schemes in Ireland. Transposition will raise governance standards, improve trustee qualification and suitability, and increase supervision through enhanced powers for the Pensions Authority.
It had been suggested that 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, the value of investments held in many schemes fell substantially during the financial crisis. This highlighted the need for stricter supervision and regulation of schemes, especially for small schemes investing in unregulated markets. Money saved for pension purposes should be properly protected to ensure that people have adequate income for their retirement years.
Pension policy comes within my remit and in carrying out this role I consult with the Minister for Finance on various matters. Given that the State incentivises and supports pension savings through tax relief, my officials consulted with Department of Finance officials on this transposition, where the merit of the principle of improved regulation and consumer protection for pension savers as provided for in the IORP II Directive was agreed.
The application of the Directive is prospective, not retrospective. This means that existing investments and borrowings can remain in place. After transposition all single member schemes, including Small Self-Administered Schemes, who are the only schemes currently allowed to borrow, will not 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 in the Directive.
Transposition of the Directive is also a key part of the Government’s Roadmap for Pensions Reform 2018-2023. The Roadmap was launched by the Government in February 2018 and details specific measures that will modernise our pension system.
Officials in my Department, supported by the Pensions Authority, are managing the transposition process for this Directive. This is a substantial Directive and preparation of regulations to transpose it is at an advanced stage. Codes of practice will also be issued by the Pensions Authority. Furthermore, to ensure that trustees of schemes are informed of their obligations under the Directive, the Authority will also undertake a communication campaign on the implementation of the Directive. 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.
I trust this clarifies the matter for the Deputy.