Trustees of pension schemes have been warned that significant extra commitment will be needed to comply with, and stay compliant with, new pensions rules.
The warning came in a webinar organised by D4 law firm Mason Hayes & Curran LLP (MH&C) on the Pensions IORP II Directive, which was transposed into Irish law last month.
Caroline Rowan of consulting firm Aon said that pension scheme trustees would have to “skill up” to deal with the additional regulatory requirements, although some schemes were considering appointing professional trustees.
MH&C’s head of pensions Stephen Gillick (small picture) said the regulations would make big changes to the pensions landscape, some of which would be difficult to put in place.
Employers and trustees are now awaiting a code of practice from the Pensions Authority, ahead of more detailed guidance on the regulations later this year.
Mr Gillick said that some of the language in the legislation would require “pretty precise guidance”.
The directive sets out a number of requirements for pension schemes, including measures designed to improve governance and enhance risk management.
It also beefs up the powers of the Pensions Authority, which will be able to call for external reports on schemes, and ask schemes to perform ‘stress tests’.
While schemes have until the end of 2022 to comply with most of the provisions, they must have at least two trustee directors in place by 31 December this year.
Mr Gillick said that these must have relevant qualifications and knowledge, while at least one must have two years of experience as a trustee.
He added that this would bring an end to the practice of appointing people with only a general financial or legal background.
The rules also require schemes to have three ‘key function holders’ — for risk management, internal audit and actuarial — and sets out minimum requirements for these roles.
Schemes must also have written policies on issues such as pay — Mr Gillick said what constituted a “sound” remuneration policy under the regulations was up for debate — as well as for outsourcing and the key functional roles.
Conflicts with GDPR?
The directive amends the Pensions Act 1990 to allow electronic communications with members.
Ms Rowan warned of potential conflicts between the legislation and the EU’s GDPR, but pointed to the greater monetary impact, and reputational damage, caused by breaches of the data rules.
Both pensions experts said the requirement for a pension benefit statement, as well as an annual benefit statement, was causing confusion.
“My view is that two separate statements are required,” said Mr Gillick, adding that more guidance was needed.
Ms Rowan said this “doubling effect” needed to be eliminated.
“It does seem that this was not intentional, and should be tidied up,” she said.