Pensions Update: 2017 Review and 2018 Predictions
15 January 2018
Winding up defined benefit schemes in Ireland
2017 saw a focus on possible legislative changes to rules on the winding up of defined benefit pension schemes in Ireland. A number of private members bills were introduced to the Dáil, the lower house of Ireland's legislature.
Between them the headline proposals included those:
- “To prevent solvent companies walking away and reneging on their pensions obligations to their employees”
- “To provide for an appeals mechanism where a pension scheme is being wound up by the trustees …”
- To make it “illegal for a solvent company to wind up a defined benefit pension scheme without the consent of the Pensions Authority …”
- To require “the Pensions Authority to prepare a report on the feasibility of changing the minimum funding standard for defined benefit pension schemes and establishing a pension protection scheme.”
- To introduce the concept of a statute based contract debt due from the employer when winding up a pension scheme which does not satisfy “the funding standard”
To date, none of these bills have been enacted and, from enquiries, we understand there appears to be some doubt over the future of such proposed measures. We are told, however, that there remains a possibility that some or all of the provisions may either appear in a standalone new bill in 2018 or may be incorporated into the Social Welfare Bill.
IORP II Directive
As the year progressed, focus shifted to the provisions of the EU Directive on the activities and supervision of Institutions for Occupational Retirement Provision (IORP II).
The new IORP II Directive was adopted in 2016. The Irish Pensions Authority (the Authority) will provide technical support to the Department of Employment Affairs and Social Protection in transposing the Directive into law by the deadline of January 2019. This Directive will impose more detailed requirements for the management, governance and supervision of pension schemes.
IORP II requires schemes to have in place various key functions: risk management, internal audit and, where applicable, an actuarial function. The Authority has sought the views of relevant bodies in order to understand any practical issues involved in imposing these requirements. Responses to the consultation will help the Authority in formulating recommendations to the Department of Employment Affairs and Social Protection on the transposition of IORP II. The final date for submission of responses was during December 2017.
Of more immediate concern, however, are the necessary preparations to be undertaken for the introduction of the General Data Protection Regulation (GDPR) which comes into effect on 25 May 2018. The GDPR will have direct effect in all Member States without the need to be transposed into national law. It is not an exaggeration, therefore, to say that there is no time to delay in ensuring compliance given the possible work involved and the focus brought to bear by the potential penalties for non-compliance.
The GDPR introduces a number of significant changes for managing data. These include:
- Increased obligations around consent
- Greater transparency requirements for privacy notices
- New security rules and breach reporting obligations
- A revamped regime for enforcement, remedies and liability
Once the GDPR becomes law, the majority of its provisions will apply immediately in Ireland and the EU. This means that pension trustees and employers who sponsor pension schemes cannot wait to rectify issues or implement changes after 25 May 2018.
Sponsoring employers and pension scheme trustees and indeed everyone responsible for compliance needs to prepare now for the introduction of the new law. We have increasingly been involved in providing the necessary training for clients specifically in relation to pension schemes.
Pensions Authority consultation and future pension plans
In reviewing 2017, it is worth mentioning the most recent Pensions Authority consultation which is currently underway and the Irish Prime Minister’s (Taoiseach) much-anticipated plan to introduce auto-enrolment to pensions in Ireland. As yet, we have no firm details of the plan but it has been reported that the Government will soon publish a five-year pension reform plan which will likely include a public consultation. The Taoiseach plans to have the first members enrolled under a new auto-enrolment pension system in 2021.
Financial Services and Pensions Ombudsman Act 2017
Worthy of note also is the Financial Services and Pensions Ombudsman Act 2017 which amalgamates the offices of the Financial Services Ombudsman and the Pensions Ombudsman into the Office of the Financial Services and Pensions Ombudsman (FSPO). This act came into force on 1 January 2018. The FSPO was established on that date and changes to the complaints procedure set out in that Act also came into force.
What’s on the horizon in 2018?
2018 is only starting but the areas requiring immediate focus from both sponsoring employer and pension trustees is the commencement of the GDPR regime. Sponsoring employers and pension scheme Trustees should secure specialist training on the GDPR, undertake a gap analysis of areas which require attention to ensure compliance, and design and put in place an action plan.
There is no time to delay given the likely work involved and the focus brought to bear by the potential penalties for non-compliance. 2018 will certainly be a busy year for sponsoring employers and trustees in getting to grips with GDPR compliance. Thereafter, focus is likely to be on any issues needing attention for compliance with the IORPs II Directive and considering any governmental plan for the future of pensions in Ireland.
We will keep our readers updated as matters progress throughout 2018. In the meantime, to learn more about what you need to do either as a sponsoring employer or pension scheme trustee to prepare for the GDPR in 2018, please contact a member of our Pensions team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.