Irish Life has appealed to the Government to avoid excessive administrative bureaucracy and costs on smaller pensions schemes.
Ireland set to impose significantly more regulation and cost than other European countries
Oireachtas Committee to support a cost benefit analysis on implementation of IORPS II
November 7, 2019: Irish Life has appealed to the Government to avoid imposing excessive administrative bureaucracy and costs on over 152,000 members of smaller pensions schemes. If imposed, the additional costs could wipe out the investment returns for thousands of schemes whose members are sole traders or employees of small enterprises.
In a presentation to the Oireachtas Committee on Employment Affairs & Social Protection, Irish Life has urged the Government to apply a new EU Directive in a proportionate way-as is permitted- so that significant additional cost is not imposed of schemes with less than 100 members.
The IORP II Directive is an EU Directive requiring pension schemes to take additional steps to improve governance, risk management, investment strategy and communications to members. Irish Life believes that it is appropriate and reasonable to apply the entirety of IORP II to large pensions schemes. However, many of its provisions would impact negatively on smaller schemes for little value to their members.
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Shane O'Farrell, Irish Life Corporate Business said “unless the Irish Government avails of the discretion permitted in IORP II to exempt smaller schemes, over 152,000 members of Irish schemes with less than 100 members will face the full rigour and costs associated with the Directive. These scheme members already have a myriad of consumer protections in place and these need to be taken into account prior to imposing further regulation.” A study by the UK Department of Work and Pensions found that some of the regulatory requirements of IORP II would create one off costs of €500 and recurring annual costs of €370. |
Shane O’Farrell added: ”The average salary of a one member scheme with Irish Life is just over €39k. These are sole traders trying to save for their retirement. These schemes receive detailed information from their pension provider already so it is difficult to envisage what additional value would be achieved by forcing these schemes to have annual reports, potentially audited accounts and then having to publish same. For the 63,000 single members schemes in Ireland, these costs could effectively eliminate all investment returns.”
The root of this difficulty is the decision by Department of Employment Affairs & Social Protection to interpret every occupational pension scheme established under a trust to be deemed an IORP. This interpretation has meant that in 2016, 72% of all IORP schemes in the EU were Irish. A number of other Member States have specifically excluded one member schemes. The IORP legislation was meant for collective employment pension schemes it was never intended to catch single member arrangements.
The outcome of the UK assessment resulted in all UK schemes with fewer than 15 members being excluded from IORP II and the implementation made voluntary for schemes with 15-99 members following its cost benefit analysis.
“Irish Life has sought the support of the Oireachtas Committee on Employment Affairs and Social Protection in urging the Government to exempt the 63,000 single member schemes from the requirements of IORP II, to conduct an analysis of the impact on schemes with less than 100 members and to implement its measures proportionately. After a very constructive discussion, the Committee undertook to write to the Minister in support of a costs benefit analysis on the implementation of IORPS II.” Shane O’Farrell concluded.
Click here for the Presentation to the Joint Committee on Employment Affairs & Social Protection