occupational pension scheme

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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.

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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:

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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

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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 [2014] 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 [2015] IECA 19).

If the Element Six case (Greene & Ors v Coady & Ors [2014] 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.

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Pension Adjustment Orders (PAOs) can raise difficult issues for trustees of occupational pension schemes.  Under the Family Law Acts trustees must be put on notice prior to a PAO being made and often the trustees are asked to review draft PAOs and confirm that they are capable of implementation.  This has the potential to expose trustees to liability.  Once the PAO is formally made by a Court it may prove very difficult to have it amended.  In order to reduce the risks of receiving a PAO which the trustees cannot implement, it is prudent for trustees to have a procedure in place for reviewing PAOs when they receive them.  Any issues which arise can then be dealt with as early as possible in the process.  These seven steps should assist with an initial review of a draft PAO and reviewing any final PAOs trustees receive.
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