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The Minister for Social Protection, Leo Varadkar, has this week published the General Scheme of the Social Welfare and Pensions Bill 2017. The General Scheme is an initial draft of a bill which is then subject to pre-legislative scrutiny before being finalised. While in the normal course it could take some months for a General Scheme to be reviewed and scrutinized, the Minister has indicated that he intends for the final bill to be enacted before the Dáil breaks for Summer Recess (normally towards the end of July).

Key points:

  • Sponsoring employers to be required to give 12 months’ notice before ceasing contributions to defined benefit pension schemes and to continue paying contributions to the scheme during that period;
  • Employers of schemes which do not satisfy the minimum funding standard / funding standard reserve, to be required to enter into funding negotiations with the trustees;
  • Proposed power for the Pensions Authority to impose contribution obligation on sponsoring employers; and
  • Extension of spouse’s pensions to civil partners and same-sex spouses in certain circumstances.

Continue Reading General Scheme of the Social Welfare and Pensions Bill 2017: statutory notice periods, debt on the employer and implications for scheme funding

We have previously commented on legislation introduced as part of the process to amalgamate the offices of the Financial Services Ombudsman and the Pensions Ombudsman (see post of 27 May 2016 below). The decision to amalgamate the offices was made by the Government in 2013 following a recommendation from the OECD. Two draft bills (The Financial Services and Pensions Ombudsman Bill and a Private Members Bill) providing for the formal amalgamation of the offices were subject to pre-legislative scrutiny by the Joint Committee on Finance, Public Expenditure and Reform and Taoiseach late last year. Pre-legislative scrutiny is a relatively new aspect of the Irish legislative process where draft legislation is reviewed and scrutinised by parliament (normally through committees) before a final version is drafted.

While the legislation is yet to be finalised and the offices are yet to be formally amalgamated, the position of Financial Services Ombudsman  (FSO) and that of Pensions Ombudsman is currently held by one individual, Mr Ger Deering.  At a recent presentation given by Mr Deering to members of the Association of Pension Lawyers in Ireland, Mr Deering indicated that he did not expect significant changes to the manner in which  complaints to the Pensions Ombudsman are dealt with on foot of the new legislation. Rather, steps have been taken to bring the FSO’s office and practices more in line with those of the Pensions Ombudsman. In particular, a new Dispute Resolution Service was introduced for FSO complaints which it is hoped will be more flexible, informal and allow for earlier resolution of disputes. In addition, it is intended that this new process will result in informal methods of dispute resolution (including mediation and conciliation) becoming the first and preferred options for resolving complaints with investigations and formal adjudications being seen as a last resort.

Parties to Pensions Ombudsman complaints should be aware of this increased focus on informal resolution of complaints. It is also worth noting that there is provision within the draft Bill to allow for the publication of Pensions Ombudsman decisions in anonymized form (to date, only summaries of selected cases have been published by the Pensions Ombudsman’s office). If this provision is included in the final Bill, it will provide useful guidance to complainants and respondents on how the Pensions Ombudsman might adjudicate in any given case and could lead to more cases being dealt with by mediation instead of formal adjudication.

 

The Pensions Authority has recently published a consultation document that proposes several reforms in relation to private pension schemes in Ireland. The stated aim of the Authority is to ensure that pension schemes are fit for purpose which, in the Authority’s view, means the schemes should be “well managed, cost efficient and understandable to their members”. As part of the consultation process the Authority will be hosting a question and answer session next Thursday, the 15th of September at which interested parties can ask questions and share their views regarding the proposed reforms. Note: bookings for the Forum must be submitted to the Authority before close of business on Friday 9th of September.

As at 1 June 2016, there were 167,987 funded pension schemes in Ireland. Not surprisingly, therefore, one of the stated drivers for the Authority’s proposals is to reduce the number of pension schemes which the Authority has to supervise. The other drivers include low public confidence in pensions and an expectation of more rigorous regulation and supervision. The Authority wishes to move to more active oversight of pension schemes as opposed to pursuing breaches after the fact. The two main external drivers of reform are noted as the IORP II Directive which will need to be implemented by 2018 and the OECD’s Report on the Irish pension system published in 2013.

A brief summary of the proposals being put forward by the Authority is set out below. Submissions have been invited by the Authority in relation to the proposals in the period up to 3rd October 2016. Further information together with information regarding the Consultation Forum is available from the Pension Authority’s website.

Continue Reading Pensions Authority to host Pension Reform Consultation Forum

As part of its remit, the Pensions Authority is responsible for the monitoring and supervision of, and the issuing of guidelines or guidance notes on, the operation of the Pensions Act. One of the key objectives of the Pensions Authority for 2016 and the coming years is to provide further guidance for trustees of occupational pension schemes.

At a Pensions Authority Seminar in January, the first tranche of the Authority’s Codes of Governance for Defined Contribution Schemes were launched with the second tranche released this week. There are currently six codes available here covering the following topics:

  1. Governance plan of action;
  2. Trustee meetings;
  3. Managing conflicts of interest;
  4. Collection and remittance of contributions;
  5. Investing scheme assets; and
  6. Paying benefits.

Continue Reading Pensions Authority Codes of Governance for Defined Contribution Pension Schemes

The Tánaiste, Joan Burton, has recently confirmed the Government’s approval to proceed with the establishment of a new expert working group with a view to putting in place a roadmap and time line for the introduction of a new, universal pension saving scheme (MySaver). The group, to be known as the Universal Retirement Savings Development Group, will be headed up by the Department of Social Protection and will be made up of representatives from the departments of the Taoiseach, Finance, Public Expenditure and Reform, the NTMA, Central Bank and Pensions Authority.

Successive governments since as early as the 1970’s have considered and attempted to address the issue of private pension coverage. The OECD, in its preliminary report on its review of the Irish pension system in 2013, noted that “private pension coverage, both in occupational and personal pensions, is uneven and needs to be increased urgently“. The OECD also suggested that increased coverage could be obtained through compulsion, soft-compulsion/automatic enrolment and/or improving financial incentives for employees participating in private pension arrangements.

It is thought that MySaver will involve some form of automatic enrolment of workers. The Tánaiste has previously indicated that this would be the preferred option. However, attempts to introduce any form of mandatory pension in the past have failed – mainly on the grounds of cost. A key factor to be considered by the new Group, is likely to be how auto enrolment fairs in the UK and in particular whether or not it proves successful in increasing pension coverage there.

While increased pension coverage in the private sector will be generally welcomed, it would seem that the actual introduction of the universal pension saving scheme is still some way off. Indications are that details of the scheme are unlikely to be finalised for another year or so while the Tánaiste has previously indicated that such a scheme will only be introduced when the economy has sufficiently recovered and workers’ wages improve.

The position relating to pensions on bankruptcy has not always been entirely clear. Currently, in order for a pension scheme to qualify for Revenue approval, a pension under the scheme cannot be assigned or surrendered, save in certain limited circumstances. As a result, pension schemes often contain wording prohibiting assignment or surrender and, in certain cases, providing for the forfeiture of the benefit on a member’s bankruptcy. This in turn raised the question of whether or not a pension (not yet in payment) was capable of vesting in the Official Assignee in bankruptcy as part of the debtor’s property.

Part 4 of the Personal Insolvency Act 2012 which was commenced at the end of last year has introduced two new provisions into the Bankruptcy Act 1988 specifically relating to pensions on bankruptcy. Section 44A of the Bankruptcy Act now provides that assets under a relevant pension arrangement (other than payments already received or which the bankrupt was entitled to receive) shall not vest in the Official Assignee. A relevant pension arrangement is defined in the section and includes a retirement benefits scheme, retirement annuity contract, PRSA, overseas pension plan etc.

Continue Reading Pensions and Bankruptcy

The Office of the Pensions Ombudsman was first established in 2003 under the Pensions (Amendment) Act, 2002. According to the Ombudsman’s most recent annual report, over the past 10 years the Office has received approximately 10,000 queries and opened over 5,000 detailed complaint files. In 2012 alone, 601 new complaint files were opened representing an increase of 24% on the files opened in 2011.

Under the Pensions Act, 1990, any party who disagrees or disputes the Ombudsman’s determination of the investigation is entitled to bring an appeal to the High Court within 21 days of the determination. In line with the increase in the number of complaints being made to the Ombudsman, we are also seeing an increase in the number of appeals being brought to the High Court against his determinations. Most recently the trustees of the Irish Blood Transfusion Service Superannuation Fund appealed a determination of the Ombudsman in the case of Willis & Ors v Pensions Ombudsman and anor.

In that case, the President of the High Court, Mr Justice Kearns, made the following points:

Continue Reading The Pensions Ombudsman – Appeals to the High Court

Overview

The recent UK Supreme Court judgment in Re Nortel GMBH (in administration) and others; Re Lehman Brothers International (Europe) (in administration) and others [2013] UKSC 52 (the Nortel Appeal) overturned the decisions of the High Court and the Court of Appeal, which previously gave “super-priority” to liabilities under financial support directions and contribution notices issued by the Pension Regulator (PR) against companies following their insolvency.

Background

Pursuant to the UK Pensions Act 2004 (the Act), the PR is given a number of “moral hazard” powers which allows it to impose liabilities upon connected and associated companies who are not necessarily pension scheme employers (“target companies”).

The most relevant of these powers are:

(a) Financial Support Directions (FSDs); and

(b) Contribution Notices (CNs).

Continue Reading Nortel – UK regulatory imposed pension liabilities now rank alongside unsecured claims in UK insolvency events