It is not clear that there will be any immediate significant legal implications for Irish occupational pension schemes of the UK exiting the EU. However, the effect on the investment market and the continued uncertainty around Brexit is likely to have more immediate and significant consequences for Irish defined benefit schemes and their sponsoring employers.

Many Irish defined benefit schemes are struggling with funding proposals that have gone off or may go off track as a result of poor market conditions. In addition, funding difficulties (and their associated impact on IAS liabilities of sponsoring employers) may trigger fresh scheme reviews and renewed focus on liability (and volatility) management.

Trustees and sponsors will need to consider with their investment and actuarial advisers what can be done to mitigate the risk of continued poor market performance in light of ongoing uncertainty during the proposed transition period. As required by the Pension Authority’s financial management guidelines, an important step will be identifying the main risks schemes are exposed to and what contingency plans can be put in place to reduce any negative impact. A general review of the scheme investment strategy and investment options may also be warranted.
Continue Reading Implications of Brexit for Irish Occupational Pension Schemes

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.

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”. 

Continue Reading Grappling with the Pensions Levy