The Institutions for Occupational Retirement Provision (IORP) II is a significant piece of legislation that has brought about substantial changes in the pension landscape. Signed into Irish law in 2021, following its introduction in Europe in 2016, IORP II aims to bring common standards to occupational pension schemes and protect members and beneficiaries.
In Are PRSA’s the only answer now? Oliver O’Connor went through the recent changes, and their impact, and how they may influence discussions with clients in the future.
One of the most notable changes brought about by IORP II is its extension to one-member arrangements. Traditionally, company directors would have a separate one-member pension arrangement, while a group scheme or occupational scheme would be arranged for the staff. However, under the new legislation, these one-member arrangements are now subject to the same regulations as larger schemes.
For those one-member arrangements established before April 2021, a derogation was given. However, those established after this date had to agree to convert by the end of December of the same year. This change signifies that employers need to take their pension schemes more seriously, appointing key function holders and understanding the cost implications associated with these changes.
Another significant development is the rise of master trusts. These are essentially overarching structures designed to manage and look after all the individual smaller trusts, which are the pension schemes of employers across the country. Life companies have established their own master trusts, leveraging economies of scale to manage the smaller trusts' compliance and risk.
The enactment of IORP II also necessitates the restructuring of pension schemes. This process involves establishing a new scheme, winding up the old scheme, and ensuring that the benefits of the old scheme are administered appropriately. In most cases, the benefits from the old scheme are simply transferred into the new scheme. However, some members may choose to draw their benefits and not join the new scheme.
IORP II also mandates that all trustees arrange for sets of accounts to be prepared for all pension schemes. This requirement is part of the broader aim to bring all large pension schemes into line and establish a common ground.
IORP II has brought about significant changes in the pension landscape. While it may seem complex, these changes are designed to protect members and beneficiaries and bring more transparency and accountability to occupational pension schemes. As we navigate this new landscape, it's crucial for employers, trustees, and members to understand these changes and their implications.
To watch the full session, please click here. In the session, Oliver O’Connor covers the following:
- New PRSA structure and implications
- Master trust regimes and what this means for existing schemes
- Is the appropriate pension structure important?
- Investing corporate funds and the tax implications
- Update on market(s) and how this may alter advice to clients
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.