Irish pension funds are reluctant to make the changes needed to comply with IORP II before it is transposed into Irish law, according to a Pensions Authority survey.
While there is a general level of awareness of the directive among trustees, there is also a widespread belief that new legislation will increase cost, time and resources, while proportionality is also a concern for schemes of all sizes, the regulator relayed.
The Pensions Authority contacted trustees of 100 defined benefit (DB) and 100 defined contribution (DC) schemes last November. Schemes of varying sizes were chosen randomly from the register of occupational pension schemes.
Around 50% of all schemes responded, roughly split two-thirds/one-third DB/DC.
Asked how familiar they were with the additional responsibilities for trustees imposed by IORP II, 69% of DB and 57% of DC schemes which responded said they were “fully aware”, with 31% and 40% respectively saying they were “somewhat aware”.
But 73% of DB and 57% of DC schemes had discussed the potential effects of the directive on the scheme with their sponsoring employer.
Over half – 57% – of trustees of DC schemes who had done so said their employer was undecided as to their options, or had not yet considered the topic, while 31% said employers would maintain and support the scheme.
A further 6% of schemes said the employer would wind up and transfer to a multi-employer/master trust scheme.
Trustees were also asked which of a number of separate policies – required under the directive – were already in place.
A conflict of interests policy was in place for 66% of DB and 77% of DC schemes, but only 25% of DB and 26% of DC schemes had a risk management policy. There was an internal control policy at 13% of DB and 11% of DC schemes.
Three-quarters of DB and nearly one-half of DC schemes said that costs were the greatest challenge of implementing the directive.
And a quarter of schemes believed the requirements would be particularly challenging and costly for small schemes to implement.
The Pensions Authority said it was disappointed by the “inadequate preparation” of many schemes and their trustees to meet the significantly enhanced obligations required of them under the directive.
Jerry Moriarty, chief executive officer, Irish Association of Pension Funds (IAPF), said the survey tallied with what the IAPF had been hearing from its members.
He said: “There has been so much uncertainty about the transposition of the directive, which is now over two years late, and that hasn’t helped in getting prepared.”
While the Pensions Authority plans to issue guidance following transposition, Moriarty said that until trustees see that guidance, they cannot be sure what they need to do in many areas.
He added: “Our main concern is that implementing the directive will be proportionate and use the flexibility allowed to have regard to the nature, scale and size of schemes.
“We are concerned that smaller schemes that potentially face a huge increase in governance costs will merely wind up and there will be no replacement arrangement until auto-enrolment is introduced.”
A spokeswoman for Ireland’s department of social protection said preparation of the regulations necessary to fully transpose IORP II was “at an advanced stage”.
It was not currently possible to provide a definitive date as to when the transposing regulations would come into force, “but it is envisaged that it will occur in the coming months,” she told IPE.
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