Authors: Philip Smith, Catherine Austin, Sarah McCague, Michael Shovlin, Daniel Watters, Aisling Ryan and Grace Moore
Social Welfare, Pensions and Civil Registration Act 2018
(the "SWPA 2018")
The SWPA 2018 was signed into law on 24 December 2018. It deals
with the usual business of revising social welfare and state
pension rates (effective from March 2019) and also provides for
equal benefit rights for same sex couples. The SWPA 2018 did not
deal with many of the previously proposed amendments to the
Pensions Act such as minimum notice periods for pension scheme
wind-ups and 'debt on the employer'. It is possible that
those amendments will be reintroduced when a similar bill goes
through the Oireachtas in 2019.
Brexit
In light of the political uncertainty surrounding Brexit, and (at
time of publication) the possibility of a delayed Brexit, the
immediate impact of Brexit on the pensions sector as a whole is not
currently known. Regardless of whether there is a deal or no deal
Brexit, the UK leaving the EU may have an impact on certain
overseas investments (in particular those serviced through the UK),
insurance and cross-border schemes. Trustees, with their investment
advisors, should consider whether steps ought to be taken, for
example, to novate existing agreements with UK managers and
custodians to other EU affiliates or agree delegation or
sub-delegation arrangements to affiliates.
IORP II
IORP II (Directive (EU) 2016/2341) ("IORP II" or the
"Directive") was required to be transposed into Irish law
on 13 January 2019. Regulations under the Pensions Act are
currently being drafted to transpose the Directive into Irish law.
Codes of practice in relation to IORP II will be issued by the
Pensions Authority. It is expected that these regulations and codes
of practice will not be published until at least the end of March
2019.
IORP II: direct effect for emanations of the
State
From 13 January 2019, IORP II has direct effect on emanations of
the State. This means that although the implementing domestic
regulations have not yet been introduced, IORP II is directly
effective against bodies considered to be under the control of the
State that provide public services where the relevant provisions of
the Directive are sufficiently clear, precise and
unconditional.
While EU directives are not directly effective against individuals
(including private sector pension schemes or the trustees of same),
in the event of a dispute ending up before the courts, Irish
domestic laws may be interpreted in accordance with IORP II giving
rise to indirect effect where the courts consider that the
Directive is sufficiently clear, precise and unconditional such
that parties are capable of giving effect to it.
IORP II: key provisions
Without sight of the domestic regulations, it is not clear exactly
how IORP II will be implemented in Ireland. However there are a
number of issues for trustees to consider now in relation to IORP
II, including:
1. Disclosure requirements
IORP II sets out that Member States shall require schemes to
publicly disclose annual accounts and reports which must give a
"true and fair view" of the assets, liabilities and
financial position of the scheme. Trustees should consider the
consequences of the requirement to publicly disclose annual
accounts and reports which are required to be approved by
"duly authorised persons". Considerations might include
the form of such accounts and reports, media coverage and the
privacy and data protection rights of certain members or
beneficiaries who may be identifiable from publishing such annual
reports.
IORP II also requires that a scheme's statement of investment
policy principles ("SIPP") be made publically available.
The SIPP must include information on how the investment policy
takes environmental, social and governance factors into account.
Currently, this is an internal document and trustees may wish to
review the content of their SIPP now that it is to be
published.
Finally, trustees need to review the content of their scheme
benefit statements to ensure compliance with additional IORP II
requirements. These include a requirement to provide a breakdown of
the costs deducted in the previous 12 months.
2. Requirement to be fit and
proper
The composition of trustee boards is expected to be revised to meet
the Directive's requirement that the board is collectively
"fit and proper". Trustee boards should consider
compiling CVs of all board members to ensure the board has an
up-to-date record of trustee qualifications and experience in order
to inform their decisions made about the composition of the trustee
board once the implementing regulations are introduced.
3. Key Function Holders
Under IORP II, schemes are required to put in place the following
three key functions: (a) risk-management; (b) internal audit; and
(c) actuarial (where applicable). Please see our Autumn update here for more details. We await the
implementing regulations in relation to the practical consequences
for trustees. In the interim, trustees should review risk
management and audit arrangements to prepare for updating or
implementing these arrangements as appropriate in the near
future.
4. Deferred members
Due to the requirement under IORP II to provide deferred members
with pension benefit statements, trustees need to undertake data
verification exercises to ensure they hold the correct contact
information for deferred members. Please contact us if you would
like further advice on how to conduct a data verification exercise
in a GDPR-compliant manner.
5. Governance manual and
checklist
As the volume of prescribed or advised policies and procedures
increases, trustees should consider producing a comprehensive
governance or board manual documenting the role and
responsibilities of the trustee board, the policies and procedures
the trustee board has in place and a schedule of review dates.
Doing so would ensure trustee alignment with the Pensions
Authority's interim guidance. Trustees may also wish to
consider putting a governance checklist in place to keep track of
how the trustee board is complying with existing and new regulatory
requirements.
6. ESG
Under IORP II, the system of governance adopted by the trustee
board is to include consideration of environmental, social and
governance ("ESG") factors. Trustee boards may wish to
consider putting an ESG policy in place.
Although we await domestic regulations, trustee boards can start
considering now how they wish to proceed to ensure compliance with
IORP II.
Please contact us if you require further advice on new requirements
under IORP II or assistance in drafting an ESG policy, a board
manual or governance checklist.
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.