In this edition of Construction Magazine, John Geraghty looks at the future of pensions.
The scientific evidence is clear and unambiguous: people are living longer and fewer babies are being born in Ireland. Science does not lie and neither (in this case), do the numbers. According to the 2021 fiscal report from the Finance Minister Pascal Donohoe, there are currently around four people of working age to support each person aged 65 and over. This number is expected to fall to just over two by 2050.The analysis highlights the need for serious policy considerations in this area.
IORP II – A brief summary
The Minister for Social Protection signed legislation on 22nd April 2021 which officially transposes the Second European Pensions Directive (known as IORP II) into national law. This action is part of the wider Road Map on Pensions Reform (2008 – 2023). The arrival of the IORP II regulations brings into force a series of wide-ranging legal requirements and governance standards. This should be of particular interest to pension scheme trustees and employer sponsoring pension schemes, either acting as trustees or paying for professional trustee services. It is hoped the new rules will ensure that trustees have the necessary powers and credentials for proper supervision of schemes – thereby protecting members and their investments.
The Pensions Authority expects all schemes to be fully compliant with all IORP II requirements by 1st January 2023. Employers and trustees should review their options and put in place an appropriate plan to become IORP II compliant in advance of the 1st January 2023 deadline.
One member pension arrangements
Ireland has a high number of one-member pension arrangements that operate under a trust system that now fall under IORP II. For many years, business owners have had the option to save for retirement using trust-based one-member pension arrangements. These gave flexibility in saving for retirement, recognising the requirements and the peaks and troughs in business. The Pensions Authority have warned that trustees of such schemes face prosecution from 1st July 2022 unless they comply with the new rules. While the introduction of IORP II has brought additional layers of security for one member pension schemes, increased regulatory costs make it prohibitive and life assurance companies have suspended accepting new one member schemes.
The introduction of IORP II has led employers to explore alternative compliant options in the marketplace such as master trusts and multi-employer schemes for providing retirement benefits and outsourcing all aspects of management and regulatory compliance. Both master trusts and multi-employer schemes have their own appointed trustees and governance is managed centrally, which removes the hefty responsibility from the employer.
The nature of both arrangements allows them to be flexible and evolve, so any new regulatory and governance requirements will be managed by the scheme and its trustees. Employers retain control over their benefit structure and the level of pension contribution that applies to its own plan, while trusteeship (along with the associated governance and compliance responsibilities) is delegated to a professional trustee board.
CPAS can help navigate your company through an ever-changing pension environment. If you are concerned about your IORP II obligations and what it means for you and your organisation, please contact our dedicated team on 01 2234947 or email j.geraghty@cpas.ie
Planning for the Future
As in life, there are many variables and changes. Planning for retirement and protecting your financial future involves forming expectations about income and expenses over the rest of your life, based on present assumptions. As the pension administrator for pension schemes in the construction industry, we have a range of solutions to help you prepare and protect your future investments. Whether you are self-employed, running a large company with multiple staff requirements, looking for life and income protection, we can help.
For more information and to find the right solution for you, contact our team for a no obligation discussion. Our team of financial specialists will put you in touch with the right team member. No obligations, no hidden fees, no jargon – just a straight forward chat to help you secure your present and your future.
