Ireland: Pensions Update, Autumn 2015

Last Updated: 12 October 2015
Article by Declan Drislane, Philip Smith, Catherine Austin, Sarah McCague, Michael Shovlin, Katherine Hayes and Marie McQuail
Most Read Contributor in Ireland, December 2017

This update applies to deferred benefit schemes and concerns the recently published Pensions Authority Financial Management Guidelines for Defined Benefit Schemes.


  • Review governance arrangements for compliance with the guidelines.
  • Revise business plan to ensure an annual check against the guidelines occurs.


  • On 22 May 2015 the Pensions Authority (the "Authority") published financial management guidelines for defined benefit schemes. The guidelines set out what the Authority sees as good practice for trustees to follow in order to understand and manage the funding and investment of their defined benefit scheme.
  • Trustees should ensure that they have access to adequate actuarial and investment advice. However, the responsibility for the scheme always rests with the trustees, who should therefore ensure that they understand the advice they receive and the decisions they as trustees are required to take.
  • Where in the guidance it is stated that action should be taken, this refers to recommended good practice. The guidelines supplement the Authority's Trustee Handbook and do not set out all of the trustees' compliance obligations.
  • The provisions are divided into four parts:
  • Data about the scheme that the trustees should have available to them
  • Governance practices relevant to financial management
  • Processes that the trustees should follow
  • Analysis that the trustees should undertake in order to arrive at decisions


The guidelines contain a sensible set of good practice recommendations. Many Schemes will already have processes that meet many of the requirements.

One point that may not have been addressed with the full formality the guidelines suggest, concerns a written agreement between trustees and employers who meet scheme costs. If there is a flaw in the recommendations it is that they do not take full account of the employer's interests as funder and stakeholder. This is a difficult balance to maintain and trustees will want to work with employers in complying with the guidelines.

There is a significant focus on risk management which may be new to some trustees but which is at the heart of good scheme governance. We have experience of reviewing, auditing and developing governance arrangements, risk assessments and mitigation procedures. If these are not already part of the Trustees' business plan, they are likely to be from now on. If you have queries on risk issue or any aspect of the guidelines, please get in touch with any of the pension team or your usual Arthur Cox contact.


Scheme funding data:

The minimum information the trustees of defined benefit schemes should have available to them are the following:

  • Scheme asset value at least annually and within one month of year end
  • Investment return relative to benchmarks and targets annually and within three months of year end
  • Investment allocation relative to strategy annually and within three months of year end
  • Scheme liabilities and solvency position (including progress relative to funding proposal, where relevant)1 at least annually2 and within three months of year end
  • Costs compared to budget (where borne directly by the scheme) annually and within three months of year end.


The trustees should ensure that:

  • there are regular scheduled trustee meetings (quarterly for larger schemes) and that all decisions about financial management are approved at formal trustee meetings with written records of same;
  • the trust deed and rules of the scheme permits the trustees to delegate their powers and that such delegation is formally decided at a trustee meeting of which a record is kept;
  • appropriate advisors and a scheme actuary are engaged that there is no conflict of interest with and that occasional rotation of such advisors occurs where it would be in the best interests of the members to do so;
  • where the employer bears some or all of the costs of running the scheme that there is a written agreement between the trustees and the sponsoring employer setting out the terms of such agreement;
  • there is a written statement of investment policy principles which describes the scheme investment strategy;
  • trustees have a full understanding of their investment powers under the scheme rules and statutory investment regulations; and
  • that trustees have a clear understanding of the contribution provisions under the trust deed and rules of the scheme and ensure these are properly followed.


In addition to their responsibilities under the Pensions Act, the following tasks should be undertaken by trustees periodically:

The reviews of investment strategy and contribution adequacy should be undertaken sooner in the event of any major change to the circumstances of the scheme.


The trustees have responsibility for the ongoing management of the scheme and subject to the Scheme's provisions must obtain and invest contributions with a view to providing the money necessary to meet the benefits set out in the scheme rules.

The guidelines draw to the trustees' attention to two important aspects of financial management:

  • Are the scheme contributions adequate to provide the benefits of the scheme in the short and long term?
  • What is the risk that the benefits cannot be paid?


In consultation with the scheme actuary, the trustees should consider the following:

  • What contribution rate is needed to provide current and future benefits as set out in the scheme rules?
  • Given the current contribution rates by members and employers, what rate of long-term investment return will be required to pay benefits?

Trustees should consider whether the required return is consistent with the current investment strategy.

  • If the scheme currently meets the funding standard, what combination of contribution and investment return will be needed to maintain solvency relative to the standard over the next three years? If the scheme does not meet the funding standard and has a recovery plan in place, are the assumed rates of contribution and investment return in that plan sustainable and achievable?
  • How willing and able is the sponsoring employer to maintain the contribution rates needed to pay the benefits? Trustees should have discussions with the employer around what would happen in the event that deficits occur in the future.


As well as assessing whether the scheme is adequately funded, the trustees must understand the risks to which the scheme is subject, i.e. what events may harm the scheme's ability to meet its obligations.

The trustees should undertake an annual risk assessment which identifies the biggest risks, assesses how likely they are to occur, assesses what impact they would have if they came to pass, and examines what the scheme should be doing to limit the risk.

There is a wide range of risk management templates available: the following is a high level overview of the process that trustees should follow, in consultation with their advisers and, where appropriate, the employer:

  • Identify the greatest risks. The greatest risks for a typical defined benefit scheme are:
  • Longevity increasing by more than expected
  • Investment losses or lower than anticipated returns
  • Liabilities increasing because of falling interest rates
  • The sponsoring employer being unable or unwilling to pay the necessary contribution rate »» Scheme liabilities increasing because of unexpected growth in member earnings
  • Assess

Although it is rarely possible to put a meaningful numerical value on any risk, trustees should at least be able to assess likelihood as high, medium or low.

  • Impact

Trustees should make a broad estimate of the likely impact on the scheme solvency and cost of any of the risks, in consultation with the scheme actuary.

  • Mitigation

Where a risk is such that the future of the scheme would be threatened, trustees should decide what steps they should take to limit the impact. This may involve reducing the likelihood or the impact of the risk arising or deciding on the steps that will be taken if the risk comes to pass.


The purpose of the above analyses is to identify threats to the ability of the scheme meet its liabilities and to allow the trustees to consider what they should do in response. Trustees need to recognise and be knowledgeable about risks and to make a conscious, informed decision of what action, if any, is being taken – taking no particular action to mitigate a risk is also a decision provided consideration has been given to how one will deal with the outcome if the risk materialises.

Trustees should bear in mind their responsibility to balance the financial interests of all members of the scheme. Some risks will have different effects on different classes of members. This is a challenge for trustees given their responsibility to balance the interests of all members of the scheme.


1 For larger schemes estimates of membership numbers should be used where appropriate in order to avoid delay. For all schemes, liability estimates should be used where appropriate.

2 In the event of major investment losses or increases in liabilities the scheme should review its funding position as soon as practicable.

* The 'Analysis' section below considers these tasks in more detail.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

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

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

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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