We have been warned ‘never make forecasts especially about the future’ but this forecast does not seem too much of a stretch.
2018 is the year when Company Directors will be forced to consider both their role in managing, and indeed the viability of, their Company Pension Plan. Why? This is due to two changes in legislation that take effect this year and next. Before going into the detail it might be helpful to consider how Directors became involved in managing pension plans in the first place. It was, and to a lesser extent is, a standard part of setting up a Company Pension Plan to appoint the Employing Company as the plan Trustee, and now Directors will shoulder the responsibilities wrought by these changes.
So what are the changes?
Firstly, as you may be already be aware, the General Data Protection Regulations (GDPR) came in to force across the EU in May 2018 and while you will be considering how it impacts your Company generally, you might also consider how it impacts your pension scheme. Obviously when it comes to GDPR it is the financial penalties that catch the eye, at 4% of global turnover up to €20m. But who is liable to the fine in the event of a significant breach? Is it related to company turnover or the scheme’s (assuming the Company is Trustee). The answer to these questions is unknown at this time. As a data controller, Directors as Trustees need to consider:
The second piece of legislation that will need to be considered has the catchy title of: The Directive on the activities and supervision of Institutions for Occupational Retirement Provision (IORP) II.
An IORP is a Pension Scheme and this piece of EU legislation should be transposed into Irish law by January 14th 2019.While we do not know the precise impact of the legislation as yet, we do have a strong sense of what it intends to do. The objective is to improve the corporate governance of pension schemes by the Trustees who should have effective Risk Management, Internal Audit and Actuarial (if applicable) functions. In addition effective controls and contingency plans should be in place covering all aspects of scheme management (including data protection). It will introduce changes to what constitutes a ‘fit and proper person’ to be a Trustee. It will increase the need to fully document what is done, with formal documentation covering all risks; there will be requirements for a depositary for scheme assets and additional disclosure documents for member information.
In the pensions roadmap published by the Government they promised to publish legislation on IORP by the 3rd quarter. While the precise details are not now known the direction of travel is clear. Directors (as Trustees) will need to consider their response to these changes as they will increase the need for governance and for resources when managing their plan. They will need to consider the interaction of two pieces of legislation and make appropriate plans, indeed they will need to consider the economics and therefore the viability of their scheme and their personal role within the governance structure.
Irish regulators have made it clear that they want to see the number of pension plans reduced and an increase in the professionalism of plan managers. These two pieces of legislation will no doubt force these changes.
To discuss how these changes might impact on your client’s role as Trustee of their company pension scheme please contact Andy Dixon on 01 237 5500 or firstname.lastname@example.org
The information contained herein is based on Harvest Financial Services Limited’s understanding of current Revenue practice as at July 2018 and may be subject to change in the future.
Please note that the provision of this product or service does not require licensing, authorisation, or registration with the Central Bank of Ireland and, as a result, it is not covered by the Central Bank’s requirements designed to protect consumers or by a statutory compensation scheme.