Automatic Enrolment

The Roadmap for Pensions Reform contained a commitment by Government to implement an Automatic Enrolment (AE) retirement savings system by 2022. A “strawman” proposal was introduced and an update to it was provided in 2019, following a consultation process with stakeholders.

The Proposal and the Update left many questions unanswered, such as:

• The state contribution rate
• The status of death benefits within the AE structure
• The adequacy of benefits given the proposed contribution limits

While those issues will need to be dealt with, if AE is ever introduced, there is now significant doubt as to whether AE will remain a Government priority and it appears very unlikely that the 2022 launch commitment will be met given the economic impact of the current pandemic. It should be borne in mind that the 2010 National Pensions Framework contained a proposal for AE which anticipated implementation by 2014. At the time, the Irish economy had fallen into recession and during the aftermath of the credit crisis large scale expensive pension reform was not a priority. In our opinion, we are unlikely to see the implementation of any AE proposal for another 5-7 years, at a minimum, although we hope that planning for the eventual introduction of AE continues in the background. In their joint COVID-19 recovery document Fine Fáil and Fine Gael commit to the introduction of an AE system, though no mention is made of a timeline.

The IORP II Pensions Directive Implementing Regulations

The Association of Pension Trustees of Ireland (APTI) obtained a stay from the High Court in March 2019 on the transposition of the IORP II Pensions Directive into Irish law by way of implementing regulations. As part of judicial review proceedings, the APTI sought a declaration by the High Court confirming that the Directive is not applicable to single member pension schemes. The matter was adjourned in October 2019 and the stay on the Minister for the Department of Employment Affairs and Social Protection lifted. It is now questionable whether we will see implementing regulations in 2020 and a resolution, or otherwise, to the APTI proceedings as the new Government will have far more pressing concerns on its agenda.

State Pension Age

The state pension age is a key battleground between the political parties, with each of the main parties committing to everything from a deferral of the 2021 age increase, to an outright reintroduction of 65 as the state pension age. The COVID-19 pandemic has led to volatile financial markets and a huge number of lay-offs and redundancies. It is highly likely that these factors will have an impact on the Social Insurance Fund (SIF), as the numbers of workers making PRSI contributions falls. The new Government will need to re-assess any election commitments made on the state pension age, especially where the SIF is not in a position to bear the burden of a lower retirement age.

The Pensions Authority Engagement Programme 2020

The Pension Authority’s 2020 Engagement Programme press release states that the aim of the Programme is to “assess how schemes are meeting their governance and risk obligations.” It goes on to state that its intentions are to assess how larger schemes are managing the risk and governance standards imposed by the Directive. It is proposed that this will be achieved by completion of questionnaires by scheme trustees and by way of meetings between the Pensions Authority and trustees. While social distancing continue, the Pensions Authority will not be in a position to engage in face-to-face meetings with trustees of large schemes and the trustees themselves are likely to have a range of far more urgent issues. For the rest of 2020, it is far more probable that the Pensions Authority will focus on providing guidance for trustees, administrators and employers on issues such as contribution suspensions, funding obligations and other critical matters.

Conclusion

The likelihood is that the post-pandemic pensions landscape in Ireland will look dramatically different than the one that existed in March. It is probable that we will see the introduction of some measures similar to those introduced during the credit crisis of 2007-2009, such as legislation providing for the deferral of annuity purchases, changes to the DB funding regime and early access to pension pots. Pensions have been here before and lessons learnt during the credit crisis will no doubt be of significant benefit. It is recommended that employers and trustees remain watchful for new Government measures or Pensions Authority guidance.

Discuss your COVID-19 related pensions now with a member of our award winning Pensions team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.