Legislative Updates

European Union (Sustainability-Related Disclosures in the Financial Services Sector) (Occupational Pension Schemes) Regulations 2023 (the “SRD Regulations”)

In our previous Legal Update, we advised on the Sustainable Finance Disclosure Regulation (“SFDR”) which requires “financial market participants” to publish information on the extent to which they take into account sustainability factors in their decision-making processes. The SFDR also requires certain additional disclosures in respect of “financial products” that promote environmental and social characteristics. Pension schemes fall within the definition of both “financial market participants” and “financial products” under the SFDR.

On 7 March 2023, the Minister for Social Protection published the SRD Regulations referenced above. The SRD Regulations amend the Pensions Act 1990 to require trustees of pension schemes to comply with specified articles of the SFDR. The SRD Regulations also give the Pensions Authority (the “Authority”) express powers to (i) monitor compliance by the trustees of schemes with the specified parts of the SFDR; and (ii) request trustees to provide such information as the Authority may require in relation to compliance with same.

The specified parts of the SFDR addressed by the SRD Regulations require certain information to be disclosed in trustees’ “pre-contractual disclosures” (i.e. IORP II remuneration policies, member booklets / investment booklets, Statements of Investment Policy Principles (“SIPPs”), Statements of Investment Governance (“SIGs”)) and “periodic reports” (i.e. trustee annual reports). The disclosure requirements relate to financial products that promote sustainable objectives (i.e. “greener” financial products) to enable end-investors to verify the sustainability of the product by covering matters such as policies on integration of sustainability risks in investment decision-making processes and due diligence policies in relation to adverse impacts of investment decisions on sustainability factors. Certain of the information required to be disclosed to members and prospective members must also be made available by electronic means including by means of a website. Please contact us if you would like our advice or assistance in preparing SFDR-compliant disclosure statements for trustee publications.

We are also aware that, in order to comply with SFDR, investment managers are requiring trustees of occupational pension schemes to certify the nature of their pension scheme as regards ESG investment. It appears that the classifications outlined in that certification process have been taken directly from the EU templates and as such are not entirely aligned with the nature of an occupational pension scheme where ESG factors are one of the many factors in making investment decisions. We recommend that if presented with such forms, trustees take appropriate legal and investment advice in relation to them.

S.I. no. 114/2023 – Occupational Pension Schemes (Revaluation) Regulations 2023

The Minister for Social Protection has signed the Revaluation Regulations in respect of the Revaluation Year 2022 and has prescribed an increase of 4% in the amount of preserved benefits. Administrators will need to update the records of deferred members with entitlements to preserved benefits to take the revaluation into account.

European updates

Digital Operational Resilience Directive

Regulation (EU) 2022/2554 on digital operational resilience for the financial sector (DORA) and Directive 2022/2556 (DORA Amending Directive) form part of the EU’s Digital Finance Package. DORA creates a harmonised regulatory framework strengthening the information and communication technology (ICT) security of financial entities (which includes pension schemes). Its objective is to achieve a high common level of digital operational resilience across all EU member states.

DORA and DORA Amending Directive came into force on 16 January 2023 and will be directly effective from 17 January 2025.

Exemptions apply for pension schemes which do not have more than 15 members in total and certain derogations apply to pension schemes which have fewer than 100 members in total.

DORA sets out requirements to:

• have in place an internal governance and control framework that ensures an effective and prudent management of ICT risk;
• use and maintain updated ICT systems, protocols and tools that meet specified requirements;
• monitor and control the security and functioning of ICT systems and tools and to minimise the impact of ICT risk on ICT systems;
• put in place a comprehensive ICT business continuity policy;
• include certain prescribed key contractual terms in contracts with third-party ICT providers; and
• report major ICT-related incidents to the relevant competent authority.

To date, the Pensions Authority has not published any guidance on how it expects Irish pension schemes to address the requirements of DORA. There would appear to be two ways to address compliance: either to include a “DORA policy” alongside the existing IORP II policies; or incorporate appropriate DORA additions to each of the relevant IORP II policies. If we can assist with such policies (or revisions to existing policies) please let us know.

Pensions Authority updates

Authority reminds trustees of scheme wind-up IORP II compliance deadlines

On 7 June 2023, the Authority issued a reminder to pension scheme trustees who are not going to comply with IORP II governance standards of the deadlines by which their schemes must be wound-up in order to avoid being subject to IORP II requirements:

• One-member arrangements established on or after 22 April 2021 (“new OMAs”) must have been wound-up by no later than 30 June 2023;
• A small number of new OMAs which had been submitted for Revenue approval prior to 11 May 2023 and were still awaiting Revenue approval on that date have six months from the date of approval in which to complete their wind-up; and
• Group pension schemes must be wound-up by no later than 31 December 2023. On 26 July 2023, the Authority issued a further video message targeted at employers to remind them of this deadline.

The Authority also reminded trustees to ensure that they instruct their scheme administrator to update the Pensions Data Register (“PDR”) with the current status of their scheme. The scheme status on the PDR must be changed to “wound-up” once the wind-up has been completed.

The Authority also noted that trustees of new OMAs and group schemes with fewer than 100 active and deferred members can produce an alternative annual report if they complete their wind-up before the relevant deadline.

Automatic enrolment

In our Spring Update, we noted that the Automatic Enrolment Retirement Savings System Bill (the “Bill”) was listed for priority publication in the Government’s Summer Legislative Programme. However, the Bill was not published prior to the Summer Recess.

Separately, the Minister for Social Protection has requested that the Pensions Council (a body which advises the Minister on pensions policy) study the technical feasibility of an alternative model for investment of auto-enrolment contributions set out in a paper prepared for the UK Institute and Faculty of Actuaries in May 2022. The Pensions Council published a request for quotations from parties interested in undertaking such a feasibility study on 21 June 2023.

Revenue updates

On 27 July 2023, the Revenue updated Chapter 10 of the Revenue Pensions Manual (the “Manual”) to clarify that where a pension scheme member dies in service, the balance of the deceased member’s benefits (after taking a tax-free lump sum) can be paid as an annuity or transferred into an Approved Retirement Fund, but cannot be paid as a taxable lump sum to the surviving spouse, civil partner or dependant.

On 6 July 2023, the Revenue updated Chapter 27 of the Manual to provide further information on the payroll notification and filing requirements for excess lump sums. This update will primarily be of relevance to scheme administrators required to process retirement lump sums that exceed statutory tax-free limits.