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Ireland's Pensions Law Blog

Five Key Irish Pension Issues in Corporate Transactions

By David Francis on Posted in Corporate Transactions, Funding, Scheme Restructuring

Pension issues can be a major factor influencing merger and acquisition activity.  Companies may pull out of deals due to uncertainty around pensions (especially uncertainty over the funding of defined benefit plans).  Pension plan deficits are now part of corporate life and how the deficit and the other pension issues will be dealt with needs to be considered early on in the deal. Outlined below are five pension issues we have seen arise in recent transactions and some solutions found to deal with them.

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Pension Simplification

By David Main on Posted in Pensions Board, Uncategorized

The Pensions Board’s deadline for the submission of responses to its consultation on the simplification of defined contribution pension provision passed at the end of February.  The consultation sought views on a number of different issues. These ranged from the number of different pension vehicles to pension adjustment orders to disclosure requirements.

A&L Goodbody have been involved in the drafting of the response of the Association of Pension Lawyers in Ireland.  In general, the regulation of defined contribution pension provision works but we consider that it can be rationalised, streamlined and improved somewhat.  It is likely that there will be action on foot of the submissions sent to the Pensions Board.  We believe that any reform of the regulation of defined contribution arrangements in Ireland will be considered alongside a review of the fees charged by pension product providers. We also believe it will be considered in light of the auto-enrolment regime that was proposed some time ago which Government has indicated will be brought into effect at some point in the future. 

We wait to see what reforms will come of the consultation exercise and welcome the fact that this is an area in which the Board is being proactive in seeking to improve the regulatory framework.  One key challenge we see with pension provision in general is getting workers and other individuals who are under retirement age to engage actively with retirement saving.  Without such engagement, the full benefit of any regulatory simplification will not be seen.

Read more on the Pensions Board’s consultation request on the simplification of defined contribution pension provision

Conflicts of interest and trustees

By David Main on Posted in Administration

The trustees of pension schemes may from time to time find that they have to exercise a discretion where they have a direct personal interest in the outcome of the exercise of the discretion e.g. because they are members who benefit from the exercise of the discretion – possibly at the expense of other classes of members. Can a trustee in such a situation take any part in the decision over how to exercise the discretion and still comply with his fiduciary duties to members?  

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Trustee Training Update

By David Francis on Posted in Administration, Pensions Board, Trusteeship

The Pensions Board has recently confirmed that they will monitor trustee training compliance on an ongoing basis. Trustees are required to record in the scheme’s annual report that they have received the appropriate training as required by the Pensions Act and within the specified time limits.

Trustees will be interested to note that the Pensions Board has recently published a new edition of The Pensions Board’s Trustee Handbook (Fourth Edition).

The Trustee Handbook provides detailed guidance on trustee duties and responsibilities and sets out good practice for trustees of occupational pension schemes.  The Trustee Handbook, in conjunction with the updated free online trustee training facility provided by the Pensions Board, will assist pension scheme trustees in satisfying their training obligations.

Trustee Training Reminder: Obligations for Trustees and Employers

By David Francis on Posted in Administration, Pensions Board, Trusteeship

1 February 2012 is the cut off time by which trustees, who were trustees prior to and after 1 February 2010, must have completed their trustee training. Trustees appointed since 1 February 2010 had to receive training within six months of their appointment. 

Every trustee of an occupational pension scheme (except a death benefit only scheme) must undertake trustee training in accordance with the Pensions Act. If you are an employer who operates a scheme you must arrange for the trustees of that scheme (other than a professional trustee or a pensioneer trustee) to receive appropriate training. A failure to do so could result in fines and even imprisonment. 

In light of the above, it would be prudent for both employers and trustees to ensure that they have met their obligations and, in particular, that trustees, who were trustees on 1 February 2010, have undertaken relevant training prior to the 1 February 2012 deadline.  An alternative course of action could be to replace the current trustees with a professional trustee (who the employer is not required to arrange training for) before 1 February 2012.

7 Key Questions Trustees and Sponsoring Employers of Pension Schemes should ask when Appointing Professional Advisers

By David Francis on Posted in Administration

As the management and governance of pension schemes continues to increase in complexity and risk both sponsoring employers and trustees of pension schemes are increasingly looking towards appointing professional advisers to bring knowledge, experience, and expertise to the governance and management of their pension schemes in an effort to reduce risk and achieve cost efficiencies.

It is important for trustees and the sponsoring employer (who ultimately may be footing the bill) to understand the nature of the relationship between them and the advisers they decide to appoint and to be prepared to question them (and the agreements governing the relationship) critically.  

Pension Scheme Administrators

Many sponsoring employers and trustees appoint pension administrators and consultants to assist in relation to their pension schemes.  The written agreements documenting such appointments should be reviewed.

Leaving aside the actual services to be provided by the administrator or consultant and the fees for doing so (which the trustees and sponsoring employer will need to be satisfied with) the key issues you must consider are:

  1. Who should be party to the agreement?
  2. What should the obligations and duties on the parties be?
  3. Who should be liable for what and what is a reasonable limit?
  4. How will conflicts, complaints and data protection be dealt with?
  5. Who controls the amendment of the agreement?
  6. Can the service provider get someone else to provide the service?
  7. How will the relationship be terminated?

Professional Trustees

Many sponsoring employers appoint professional or independent trustees.  This is often under a service agreement or letter of engagement. Many of the issues outlined above in relation to administration agreements will also arise in this context. It is imperative that you understand the effect of the key provisions of such documents and the relevant provisions of the pension scheme. Particular consideration needs to be given to the charging clause and indemnity and exoneration provisions under the scheme’s governing trust documentation and how these interact with the service agreement appointing the professional trustee. If such written agreements are not already in place this should be rectified.

Trustee contribution demands: is there a duty to make them?

By David Main on Posted in Scheme Restructuring

As more and more sponsors of defined benefit schemes are preparing to terminate contributions to their schemes or are going into receivership, examinership or liquidation, a question which keeps arising for trustees is whether or not they are under a duty to demand payment of the scheme’s deficit.

When trustees either know or have a justifiable belief that the sponsor of their defined benefit scheme is about to terminate its contribution liability or suffer an event of insolvency, our view is that the trustees need to take immediate action. The first thing they need to do is to look at the scheme’s employer contribution rule and the winding-up provisions and see what powers they have.  Only then can they decide what to do. 

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Managing Occupational Pension Schemes in Crisis: 5 things to Consider

By David Francis on Posted in Funding, Scheme Restructuring, Trusteeship

The continuing economic crisis sees those with responsibility for pension schemes faced with a number of complex issues. There are a number of core issues which we are seeing consistently arise. These include the following:

  1. Check the Power of Amendment
  2. Check Employment Contracts
  3. Check the Effect of the Change
  4. Conflict, Confidentiality and Consultation
  5. Obtain Advice

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Grappling with the Pensions Levy

By Chris Comerford on Posted in Funding, Tax

The pension levy was introduced under a seemingly innocuous piece of legislation, the Finance (No.2) Act 2011. The Act, insofar as it provides for the levy, is just 10 pages long.  Less is more?  Not in this case. While the dust hasn’t quite settled on the financial impact of the levy on struggling pension schemes, practitioners are still struggling to get to grips with exactly what some of the more technical requirements under the legislation mean, and how they can be complied with. The primary problem practitioners are having in deciphering what is required under the legislation is a lack of clarity, loose drafting and, in some cases, seemingly superfluous wording.  In the case of the Finance (No.2) Act 2011, the Government would have been well-advised to follow the approach of “more is more”. 

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