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Irish Pensions Magazine Autumn 2016
12
News
Article Author
Jerry Moriarty
CEO
IAPF
• For individual entitlements not to be reduced as a
result of the transfer.
Governance
IORPs will have to put in place an effective system of
governance which includes a transparent organisational
structure with a clear allocation of responsibilities.
IORPs will need to have in place and apply written
policies in relation to risk management, internal audit
and, where relevant, actuarial activities and outsourced
activities. Plans will also be required to carry out and
document a new own risk assessment at least every
three years or without delay following any significant
change in the risk profile of the Plan.
The internal audit must be independent from other key
functions.
IORPs will have to put an effective internal control system
in place which will cover accounting and administrative
procedures and appropriate reporting arrangements.
Outsourcing:
Schemes will be required to notify their
national regulator where they outsource any activities
covered by the Directive and prior notification will need
to be given before any key functions are outsourced.
Schemes will also be required to enter into a written
agreement with the service provider where activities
covered by the Directive are outsourced.
Fit and Proper Management:
IORPs shall ensure
that those that run the Plans have the qualifications,
knowledge and experience on a collective basis to
ensure the prudent management of the IORP.
Remuneration policy:
Plans, taking account of the
size, complexity and scale of the activities of the IORP,
will need to establish and apply a sound remuneration
policy for all those persons who effectively run the IORP,
perform key functions and other categories of staff
whose professional activities have a material impact on
the risk profile of the IORP. The policy will also apply to
service providers to whom activities are outsourced. It is
unclear how the remuneration policy would need to be
applied to professional trustees, professional advisers
and service providers.
Risk Management:
IORPs shall put in place a risk management structure
that is proportionate to their size and complexity of
operations and also to the operations which have
been outsourced. IORPs will have to produce a risk
assessment.
Trustees
Professional qualifications: Each individual trustee will
not be required to have professional qualifications as
the qualifications, knowledge and experience of the
persons who run an IORP can be looked at collectively.
Fit and proper persons:
The Directive requires each
Member State to ensure that the competent authority
is able to assess whether the persons who effectively
run an IORP, or have key functions, fulfil certain fit and
proper person requirements. If implemented, this could
mean that the Pensions Authority would need to have
greater involvement in assessing and monitoring the
fitness and propriety of pension plan trustees.
Communications
Members must be given information on the past
performance of the scheme for the preceding 5 years
when joining a scheme where they bear the investment
risk.
Annual accounts and reports should be publicly
disclosed.
Pension Benefit Statement
Statements may be issued in electronic format and
be should be presented in a way that is easy to read.
The statement should include a best estimate and
an unfavourable scenario. Deferred members will be
required to receive a statement.
ESG factors
There are multiple references in the Directive to
those running an IORP being required to consider
environmental, social and governance factors in
investment decision making.
Supervision
Supervision should be forward looking and risk-based.
It should be applied in a manner that is timely and
proportionate to the size and complexity of the IORP.
TheRegulatorwill have thepower to seekdocumentation
regarding governance, risk management and other
issues.
Next Steps
The Department of Social Protection will be responsible
for putting the legislation in place to transpose the
requirements of the Directive into Irish law by November
2018. There are a number of key decisions that will
need to be made. Firstly, smaller schemes (generally
less than 100 members) can be exempted from most
of the requirements of the Directive. Secondly many of
the new requirements shall be “proportionate to the
nature, scale and complexity of the IORP” which gives
some scope on the interpretation of the next steps. The
IAPF Benefits Committee will be looking at the detail of
the Directive and its potential impact on Irish schemes.