Data protection rules already apply to the trustees of pension schemes as a result of the Data Protection Acts 1988 and 2003. The existing data protection legal framework will be significantly strengthened from 25 May 2018 when the EU General Data Protection Regulation (GDPR) comes into force. If trustees have not already started to consider whether their scheme arrangements will be compliant with GDPR requirements, now is the time to do so.
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).
- 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.
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.
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
Since June 2012, under the Occupational Pension Schemes (Disclosure of Information) Regulations 2006, trustees of schemes which are subject to the statutory funding standard are required to submit an Annual Actuarial Data Return each year. Details of the Return are set out in the Disclosure Regulations which must be completed by the scheme actuary and submitted to the Pensions Authority within 9 months of the end of the scheme year.
In the period up to 31 March 2016, the Pensions Authority received 699 Returns and has now published a summary of the information. A copy of the summary is available here. Points of particular interest include:
Continue Reading Pensions Authority releases statistics for defined benefit schemes
Statutory Instrument No.229 of 2016, signed by the Minister for Social Protection on 5 May, represents another step towards the amalgamation of the offices of the Financial Services Ombudsman and the Pensions Ombudsman. The Government made the decision to merge the two agencies in May 2013, after a recommendation from the OECD.
Continue Reading Pensions Act amended to allow Financial Services Ombudsman to hold the office of Pensions Ombudsman
At the Irish Association of Pension Funds Annual Investment Conference held last week, Brendan Kennedy, the Pensions Regulator, reiterated the Pensions Authority’s continued focus on good governance and its plans for ramping up the Authority’s programme of engagement with trustees of defined benefit schemes. This engagement includes continuing to invite such trustees to meet with the Authority for detailed discussions on how the trustees undertake the management of their scheme and their governance responsibilities.
The Pensions Regulator has confirmed that the objective of these meetings is to find out what trustees know and understand. While the Authority recognises that trustees are faced with difficult responsibilities and must take advice in relation to matters in respect of which they have no or limited expertise (for example actuarial, legal and investment matters), as the responsibility for the scheme rests with the trustees, the Authority expects them to understand the advice they receive and the decisions they are required to take. It is for this reason that the Authority insists that the meeting with the trustees be without their financial or legal advisers.
The Authority has indicated that the financial management guidelines for defined benefit schemes (issued in May 2015) will be used as the basis for these discussions. These guidelines outline what the Pensions Authority views as good practice for trustees of defined benefit schemes in relation to their understanding and management of the funding and investment of their defined benefit scheme. While not legally binding, it is expected that the trustees (at a minimum) will have the information and understanding set out in these guidelines. The guidelines cover the scheme data the trustees should have, governance practices relevant to financial management, reviews/processes the trustees should undertake and the analysis the trustees should carry out to arrive at decisions.
Clearly, for defined benefit schemes, the focus is on financial matters and the Authority expects trustees to understand the strategies and plans being pursued by the scheme and be able to explain these and how they were arrived at. According to the Pensions Authority, trustees should know more than their members, have enough time and commitment to carry out the role as trustee properly and be able to ask the right questions (in particular, of their advisers). These meetings are seen as a permanent part of the Pensions Authority’s supervision of defined benefit schemes and perhaps, in the future, will be extended to large defined contribution schemes. It can be expected that the Authority will take a more robust regulatory approach to schemes where they have concerns about trustee ability following such meetings.
The Regulator also announced at the conference that the Pensions Authority was developing pension reform proposals for 2017 and a public consultation process for later this year.
What is the Omega Pharma case?
The Omega Pharma case has confirmed that the scheme’s governing documentation and not the Pensions Act minimum funding standard determine the employer’s liability to contribute to defined benefit schemes on wind-up.
On 25 July 2014, Mr Justice Moriarty in the Commercial Court handed down judgment in the case of Holloway & Ors v Damianus BV & Ors  IEHC 383 and found in favour of the trustees of the Omega Pharma defined benefit scheme in their claim for deficit contributions against the scheme’s employers. The trustees succeeded in obtaining judgment in the amount of €2,439,193.56 (inclusive of interest) against the employers. On appeal, the newly established Court of Appeal affirmed the judgment in favour of the trustees (Holloway & ors -v- Damianus BV & ors  IECA 19).
If the Element Six case (Greene & Ors v Coady & Ors  IEHC 38) was the most important pensions law case for trustees in the recent past, the Omega Pharma case was not far behind. The Omega Pharma case is also particularly relevant to employers who operate or participate in defined benefit schemes. However, a number of key issues remain unanswered.
Continue Reading The Omega Pharma case – Trustee and Employer Guidance
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.