Ireland: Pensions Update - Autumn 2014

Last Updated: 13 November 2014
Article by Declan Drislane, Philip Smith, Catherine Austin, Eugene McCague and Orla Ormsby
Most Read Contributor in Ireland, October 2018

BUDGET 2015

The Minister for Finance confirmed in his budget speech that the 0.6% Pension Levy will not apply beyond the end of 2014. The additional 0.15% pension levy introduced for 2014 and 2015 will expire as provided in legislation at the end of 2015.

It has been estimated that €2.3 billion has been paid in levies by pension schemes since 2011.

The ending of the pension levies is an opportunity for trustees and employees, who have not yet resolved who will bear the cost of the pension levies, to reach a decision on the matter in the knowledge that no future levies are proposed for the time being.

OMEGA PHARMA CASE

Background

The case was brought by the trustees of the Omega Pharma Ireland Pension and Death Benefit Scheme (the "Scheme") against an overseas principal employer and Irish participating employers in the Scheme. The case arose after the employers announced redundancies in September 2012 and the intention to wind up the pension scheme. The principal employer issued the trustees with three months' notice of its intention to terminate liability to contribute to the Scheme in accordance with the Scheme rules.

Clause 8.1 of the Scheme's 2004 trust deed stated that the employers shall pay the Trustees "the moneys which the Trustees determine, after consulting the Actuary and the Principal Employer, to be necessary to support and maintain the Fund in order to provide the benefits under the scheme."

The Trustees sought to engage with the trustees seeking contributions but the principal employer failed to respond to the Trustees' correspondence and in the absence of any engagement by the Company, the trustees served a contribution demand for €3.01 million (later reduced back to €2.23 million) on the Company.

Judgment

Justice Moriarty found that during the three month notice period, the Trustees were entitled to make a final contribution demand.

Having taken professional advice, the Trustees determined that funding on the statutory minimum funding standard ("MFS") basis was insufficient to provide the benefits under the Scheme but that an annuity buy-out basis would be 'excessive' (resulting in a deficit of €5.8 million). A combination of annuity buy-out and MFS had been recommended by the scheme actuary and had been sought. The Court was of the opinion that the trustees had come to a reasonable decision in the absence of any response from the employer but the Court offered no guidance on what was an appropriate basis for a contribution demand. Moriarty J stated that "once trustees had acted honestly and in good faith, taking into account all relevant considerations and excluding irrelevant ones, the appropriate standard for review of their decisions is whether no reasonable body of trustees could have come to the same decision."

Conclusions

Pending appeal, it is difficult to draw any formal conclusions from the judgment. It would appear, at this stage to suggest that:

  • having taken appropriate advice, it is not unreasonable on a wind-up for trustees to seek funding in excess of the MFS basis;
  • fund contribution demands can be validly issued in a notice period (although each wind-up should be considered in light of the scheme's own terms);
  • it is risky for employers not to engage with trustees who consult them; and
  • Courts are reluctant to overturn decisions properly taken by trustees that appear to have been reasonably arrived at.

Omega Teknika Limited has indicated an intention to appeal the judgment and there remains uncertainty until an appeal is heard.

PENSIONS AUTHORITY GUIDELINES FOR TRUSTEES OF DEFINED BENEFIT SCHEMES

Since the early 2000's, a majority of schemes have failed to meet the MFS resulting in wind-ups, reductions in benefits or a membership freeze. As at 21 September the Pensions Authority notes that, there were 61 schemes which remained non-compliant with the MFS.

As a result, the Authority published draft Guidelines for trustees to assist them in ensuring that schemes are managed effectively and encouraging trustees of schemes who are not meeting the MFS to accelerate their efforts to find a solution to their funding deficit without Authority intervention.

The draft Guidelines look at four key areas:

Scheme Data – this sets out what practices the Authority expects trustees to follow in order to understand and manage the funding and investment of their defined benefit scheme.

Governance – this outlines governance practices relevant to the financial management of a scheme.

A list of periodic tasks to be undertaken by the trustees to include:

  • review of investment strategy;
  • review of contribution and funding adequacy;
  • preservation/review of risk matrix;
  • discussions with employer about contributions and related issues;
  • review of investment management performance; and
  • review of scheme costs.

Analysis by the trustees the purpose of which is to identify threats to the ability of the scheme to meet its liabilities and to consider what action to be taken in response.

PENSIONS AUTHORITY PUBLISHES MODEL DISCLOSURE DOCUMENTS

The Pensions Authority has published the first in a series of model documents on disclosure of information requirements. The first model documents to be published are an annual benefit statement for a defined contribution scheme and a statement of reasonable projection (SRP). The publication of these documents is in response to submissions received to the Pensions Authority's DC pension consultation paper published last year. The submissions indicated that the quality of member information needs to be improved considerably and made more user-friendly.

The Pensions Authority notes that: "It is important that pension scheme members receive accurate and understandable information in a structured manner so that they can make informed decisions about their retirement savings."

The Pension Authority proposes to issue further model disclosure documents over the next few months.

NEW SECTION 50 REGULATIONS

On 2 September 2014, new Regulations setting out the information and notification requirements to be carried out by scheme trustees before the Pensions Authority issues a unilateral section 50 direction (i.e. other than a direction on application by the Trustees), were signed.

Where the Authority proposes to make a unilateral direction under section 50 or section 50(B) of the Pensions Act and where the Authority requires, members must be notified of the proposed direction by trustees and the members will be given an opportunity to make submissions to the Pensions Authority in relation to the direction. Those submissions must be considered by the Pensions Authority prior to its making a direction under Section 50.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Arthur Cox
Arthur Cox
Arthur Cox
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Arthur Cox
Arthur Cox
Arthur Cox
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions