Breaking news on the impact of IORPS II on pension schemes
Important update on One-member Company Pensions schemes and EU IORP II regulations
This week Minister for Social Protection, Heather Humphreys, published regulations to transpose the EU IORP II Directive into Irish legislation. These regulations introduce higher standards for pension scheme governance. The regulations will apply to all company pension schemes, but there are different timelines depending on the size of a scheme.
What changes will the legislation introduce?
- One-member schemes have a "derogation" (an exemption) that defers most aspects of the regulations for five years.
- The regulations will apply more immediately to group schemes. However, the Pensions Authority has consistently recognised that schemes must be given sufficient time to become compliant in an orderly manner.
A small number of changes will apply to one-member schemes that do not have the five year derogation. These include;
- New investment selections - no more than 50% may be in property
- New borrowing is not allowed
The restriction limiting investment in property to no more than 50% includes a look through to any property element in a managed or multi-asset fund. This applies to property along with any investment in an unregulated market.
Some further work to confirm the precise controls around the restriction to a maximum of 50% in property remains to be done but, importantly, the Pensions Authority had already said that existing investments may continue.
- The new regulations apply to company pension schemes, AVCs and SSAPs.
- The new regulations do not apply to Personal Pensions (other than Trust-RACs which Irish Life does not have), PRSAs, PRSA AVCs, vested-PRSAs or ARF/AMRFs.
We believe that the five year derogation for one-member schemes is appropriate. It will allow the introduction of the IORP II regulations to be coordinated with the other elements of the Government’s Roadmap for Pensions, including pension simplification.
Working for a positive pension landscape
We expect to see further changes in the next couple of years, such as proposals for a significant review of PRSAs. This could see employer contributions to a PRSA being equalised with the current employer contribution rules for company pensions.
Irish Life has actively engaged with the Pensions Authority, Revenue and Government departments on these issues. We will continue this positive engagement to ensure that the future pension landscape gives the best outcomes for members and employers, and that the value of advice is recognised.
Company pensions continue to be a valuable benefit to your business clients and this has not changed. The tax relief available and benefit thresholds remain the same for all company pension schemes, both one-member and group.
It's our aim to continue to support you with our innovative fund offering, digital supports and the option to appoint an independent trustee on one-member company pension schemes.