With effect from 13 January 2019 a new EU directive on pensions comes into effect. This directive is called IORPS II. IORP stands for Institutions for Occupational Retirement Provision (i.e. pension schemes)
Legislation is required to transpose this directive into Irish law and the relevant legislation is due to be introduced by Government later in 2018. It remains to be seen if this directive applies to all pension schemes or only to scheme which have more than 100 members.
The directive requires trustees to have effective systems of governance and for the trustees to be fit and proper.
Effective systems of governance
Effective systems of governance mean that the trustees must have written objectives, documented processes and procedures and policies on risk management and internal audit. The legislation may require trustees to have 4 trustee meetings per year.
Fit and proper trustee requirement
Fitness means that the trustees as a group must have the necessary qualifications, skills and experience. In practice at least one of the trustees may be required to pass an examination in trusteeship.
Proper means that each trustee must be honest, diligent and independent-minded.
Other IORPS requirements
In addition, the trustees will be required to prepare and maintain:
A remuneration policy, covering all those persons who effectively run the pension scheme
An overall transparent operational structure for the scheme
An appropriate investment and funding structure
An adequate and effective internal control framework
Have a conflict of interest policy
Appoint Key Function Holders (KFHs) for risk management and internal audit.
The trustee board will also be required to set and oversee effective communication and reporting processes for members and beneficiaries. In relation to improving communication for members it is proposed that:
- Annual Reports and Accounts should be publically disclosed
- Annual Benefit Statements will be required for all deferred members including those in Defined Benefit schemes
- Members must be given retirement options in advance
- Information must be provided to prospective members, pre enrolment
- An additional projection will be required on members annual benefit statements.
There are 2 trustee qualification courses available, Law and Governance Programme for Trustees from the Irish Institute of Pensions Management (IIPM) and Professional Certificate in DC Pension Scheme Trusteeship from Life Insurance Association (LIA)
We will issue a further update on this topic when the legislation has been passed.
