Press release
IORP II Directive Transposed
From Department of Social Protection
Published on
Last updated on
From Department of Social Protection
Published on
Last updated on
The Minister for Social Protection, Heather Humphreys, T.D., has formally signed the ‘European Union (Occupational Pension Schemes) Regulations 2021’ which, amongst other things, amends the Pensions Act 1990 [No. 25 of 1990] to transpose requirements of Directive (EU) 2016/2341 [OJ No. L 354, 23.12.2016, p.37] (“IORP II Directive”) into Irish law.
While many of the provisions of the Directive have already been transposed into Irish law, regulations under the European Communities Act 1972 were necessary to transpose requirements of the Directive not provided for in Irish law. The over-arching objective of the IORP II Directive, which is a revision of the original IORP Directive of 2003, is to facilitate the development of occupational retirement savings in the European Union.
The general principle in respect of the transposition of the Directive, in keeping with the Government’s Roadmap for Pensions Reform, is that the requirements of the Directive will apply to all schemes and trust Retirement Annuity Contracts (RACs), including small schemes and one-member arrangements, where possible and as appropriate, in order to ensure that all members and beneficiaries are afforded equal protection irrespective of size. In relation to existing one-member arrangements, post-transposition, IORP II investment and borrowing rules will apply only to new investments or borrowings entered into by such arrangements. A 5-year transitional period will also apply to existing one-member arrangements in respect of new IORP II requirements (other than investment and borrowing related requirements).
Speaking after signing the Regulations, Minister Humphreys said:
“The IORP II directive is a substantial directive with many of the provisions supporting positive reform of the Irish occupational pension sector. The regulations I have signed today will provide for a number of improvements within the area of occupational pensions in Ireland such as – enhanced governance standards for schemes and trust RACs in Ireland - better protections for pension scheme members and beneficiaries - enhanced information provision to scheme members and beneficiaries including the introduction of a Pension Benefit Statement on an annual basis - the removal of obstacles for cross-border provision of services and transfers, and - promotion of long-term investment in growth, environment and employment enhancing economic activities.
“In addition, many of the provisions in the IORP II Directive will support positive reform of the Irish occupational pension sector in keeping with the Government’s Roadmap for Pensions Reform.”
ENDS
In January 2019 Government approved the planned transposition of Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision (IORP II) by regulation into Irish law. Work on the transposition of the Directive has been ongoing for the last number of years.
Institutions for occupational retirement provision (IORPs) are effectively private, normally pre-funded, supplementary pension plans linked to an employment relationship. In Ireland, IORPs are generally trust based occupational pension schemes and trust RACs (Retirement Annuity Contracts), which are registered with the Pensions Authority and must be approved by the Revenue Commissioners. Occupational pension schemes are regulated under the Pensions Acts 1990, as amended.
The IORP II Directive (a recast of the previous IORP I Directive) is a substantial Directive which provides for a range of new requirements concerning governance, management standards in schemes, safekeeping of assets, the need for clear and relevant information to members, the removal of obstacles to cross-border provision of pension services and the facilitation of cross border transfer of schemes. There are also provisions that will enhance the powers of the Pensions Authority for effective supervision of occupational pension schemes.
The key new provisions in relation to enhanced management and governance of schemes include:
The key new provisions in relation to prudential supervision of schemes include:
The key new provisions in relation the provision of information to members include:
Enhanced information and data provision to members is a key part of the Directive. This is extremely important so that members have a greater awareness of the potential pension benefits payable to them when they reach pension drawdown. Trustees of schemes and trust RACs will be required to provide a Pension Benefit Statement to each member (including deferred members) at least annually. This concise statement has to be clear and comprehensible in language and contain key personal and generic information in respect of pension entitlements and the scheme or trust RAC.
A copy of the Directive is available HERE
The provisions of the Regulations are summarised below.
Part 1 of these Regulations sets out citation, general interpretation and application provisions in respect of the Regulations.
Part 2 of these Regulations amends the Pensions Act 1990 (“1990 Act”) to insert definitions into the Act, or amend existing definitions; to set out prosecution related provisions and other technical amendments.
Part 3 of these Regulations amends the 1990 Act by deleting provisions which provide exemptions to ‘small trust RACs’ and ‘one-member arrangements’ from the application of sections of the Act and provides for transitional provisions in respect of such small trust RACs and arrangements. This Part also inserts new provisions to exempt borrowing arrangements entered into by the trustees of a one-member arrangement before the coming into operation of these Regulations.
Finally, Part 3 amends, and inserts new, provisions in respect of the operation of cross-border schemes.
Part 4 of these Regulations amends the 1990 Act by inserting new provisions in relation to investment rules and Statement of Investment Policy Principles and making a number of technical amendments to existing provisions of that Act.
Part 5 of these Regulations amends the 1990 Act by inserting provisions, or amending existing provisions, to set out –
Part 6 of these Regulations sets out provisions in respect of Pension Benefit Statements.
It also amends section 50 of the 1990 Act to require trustees of a scheme to provide notification, without delay, of any decision to reduce benefits payable under the scheme to scheme beneficiaries and to provide for a minimum three months standstill period before any such decision is implemented.
Part 7 of these Regulations amends the 1990 Act by inserting provisions to set out requirements in respect of –
Part 8 of these Regulations amending the 1990 Act by inserting new provisions requiring the Pensions Authority to, amongst other things, collaborate with the EU Commission on the supervision of schemes and trust RACs and co-operate with EIOPA for specified purposes.
Part 9 of these Regulations amends the definition of ‘reinsurance’ in Regulation 3 of the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015).
Link to the European Union (Occupational Pension Schemes) Regulations 2021: here