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Significant action needed to comply with new pension regulations

24 August, 2022

  • Over half of employers undecided on using a ‘Master Trust’ for their future pension vehicle.

  • Over half of employers believe Master Trusts will offer better value for members.

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Irish companies are expected to be compliant with new pension regulations, based on an EU Directive (The Institutions for Occupational Retirement Provision II - or IORP II), by the end of 2022. The overall purpose of the Directive and regulations are to improve the governance, risk management and transparency of pension schemes and to better protect pension savers. 

The impact of the regulations will have a fundamental impact on the Irish pension landscape, bringing about significant change, including consolidation of existing pension arrangements. One such route to consolidation is a Master Trust, which can offer an efficient future pension vehicle with the ability to facilitate better outcomes for members.

PwC carried out a survey amongst a range of Irish employers who offer occupational pension plans for their employees to understand their views on the impact of the new regulations and how they are adapting. With this significant deadline approaching, the survey reveals that the majority of Trustees have engaged with the sponsoring employer on the requirements needed to comply with the new regulations, but some gaps remain as over one in five (22%) said this engagement had not yet happened. 

Commenting on the survey findings, Munro O’Dwyer, PwC Ireland Pension Partner, said: “There is a clear move across many employers to consider the implications of the changing pension regulatory regime. The Pensions Authority has on many occasions referenced the need for preparation and action, so employers should now be actively planning a way forward. Given that solutions are available to employers, falling foul of this legislation would be unhelpful and costly for employees and employers.” 

3 in 4 employers have considered how best to mitigate the impact of the regulations

While over three-quarters (76%) of employers have considered the options available to mitigate the impact of the new regulation, nearly a quarter (24%) have not. The requirements of the regulations are far reaching and will require additional time, cost and risk to maintain ongoing compliance. Whilst the responsibility of compliance rests with the Trustees, it is important for employers to consider the impact of the regulations on the management of their pension scheme. Simply complying with the regulations may not be the optimal way forward for employers and there are a range of options to consider.

Munro O’Dwyer commented: “Many employers are using this opportunity to consider, and challenge, how their pension scheme is being managed and the value that is being delivered to employees. This is proving to be a valuable exercise, given the potential opportunity to utilise a Master Trust for future pension provision. However, more generally, it allows the existing pension arrangements to be benchmarked against the market from a technology, communication, service, investment performance and cost perspective.   Adopting a Master Trust eliminates the need to put in place all the additional regulatory requirements by the end of 2022. For many employers of scale and size who have a defined contribution pension scheme, a Master Trust solution holds significant attractions.”

Over half of employers undecided about transitioning to a Master Trust

While there is a clear move towards the use of Master Trusts for pension provision, many employers are currently in the process of evaluating that decision. Over half (55%) of Irish employers are undecided on choosing a Master Trust as a future pension solution. With this level of undecidedness, there is the potential to create clear capacity issues in the remainder of 2022 as these decisions get made. The Pensions Authority has been very clear in its objective to consolidate the number of defined contribution pension schemes in Ireland and Master Trusts are a route to achieving this.     

Munro O’Dwyer continued: “Over the past 12 months we have seen a sharp increase in the level of interest in Master Trusts from employers as they start to work through the impact of the pension regulatory changes. As employers look to enhance their pension proposition, we expect Master Trusts will become a prominent - and very likely the dominant - pension vehicle in Ireland. The majority of employers are reaching the conclusion that a Master Trust is their preferred solution. For those still undecided, we would encourage them to seek independent support to help them assess if a Master Trust may be suitable for them.”

The majority believe Master Trusts will offer better value for members

The majority (57%) of responding employers believe a Master Trust will offer better value than current arrangements for their employees, but a sizable proportion (43%) believe it will not. One of the main benefits of a Master Trust is economies of scale with a view to achieving better outcomes for members.  Three factors are critical to what the member receives on retirement - contributions made, strong investment performance and low charges.  With a Master Trust, the potential scale and investment expertise that can be harnessed can be expected to contribute to positive outcomes.

Munro O’Dwyer concluded:  “We have moved out of the early adopter stage for Master Trusts in Ireland and we expect to see a dramatic shift during the remainder of 2022. Those employers who are moving to a Master Trust are seeing that the Master Trust propositions have invested significantly in engagement enhancing technology over the past few years which will ultimately benefit the pension scheme members.”

About the survey: 

PwC’s 2022 Pensions Survey took place in Spring 2022 with 58 organisations participating. These organisations, from SMEs to multinationals, were across a range of industries offering occupational pension schemes to their employees. These industries included financial services, manufacturing, technology, pharma and construction.


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Johanna Dehaene

Corporate Communications, PwC Ireland (Republic of)

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