Insurance Ireland has today responded to the Pensions Authority consultation on the Draft Code of Practice for Trustees of occupational pension schemes and trust retirement annuity contracts (trust RACs).
Overall, IORPII and the output from the Interdepartmental Pensions Reform and Taxation Group Report on pension simplification and reform will require significant structural changes to pension products, administration and the pensions landscape as a whole. The ‘end destination’ for what pension products will look like is not yet clear. It is vital that any material changes are delivered in a pragmatic, coordinated and streamlined manner in order to avoid unnecessary administrative and regulatory costs and to ensure that the new regime results in real benefits for pension schemes and their members. Clear and timely guidance from the Pensions Authority following the transposition of the IORPs II Directive will play a vital role in supporting providers and trustees to deliver fair outcomes for policyholders.
However, in the absence of further guidance on Master Trusts and clarification of the future shape of PRSAs, it is difficult for pension providers to make alternative arrangements available. It is also impossible for trustees and/or employers to have certainty in the decisions they should take now. Without viable alternatives, the application of the draft Code may mean that trustees (and ultimately employers and/or members) will incur short-term costs which turn out to have been unnecessary, or at worst, decide simply to close schemes. The point at which trustees and employers will be able to make long-term decisions on whether to bring their scheme into full compliance with IORPII, move to Master Trust, or move to a revised PRSA structure, will vary depending on their circumstances. The Code should recognise that trustees and employers will need time to make decisions regarding the future of their schemes and can only make fully informed decisions when full information is available.
Insurance Ireland is concerned about the lack of clarification of the roles of the various participants in the industry, including Registered Administrators and Master Trust providers, and have real concerns for the ability of the sector to fully comply with the rules by July 2022, given the lack of guidance regarding the IORPII rules. Given the nature of the changes and the extent of IT system changes that would be required for compliance, the lack of clarity on how these rules will be supervised and enforced is not helpful in achieving full compliance in good time. IT changes require detailed and specific requirements and a sufficient lead-in time to schedule and appropriately test the changes. Without supervisory guidance, there is a real danger that any changes made would not reflect the Authority’s expectations and could result in additional unnecessary costs and wasted time. Given that there is currently no specific guidance on the expectations of Registered Administrators and that the guidance on the expectations of Master Trusts is not due to be finalised until December 2021 six months from this date (to July 2022) is not sufficient to ensure full compliance with the requirements.