Employers wary of new pension rules

Increased governance and risk-management costs will hit existing workplace pension schemes

Employers are not yet convinced of the need to change their staff pension arrangements just months before new governance and risk-management rules come into effect — with some not far short of half-questioning whether it represents value for money.

The reforms are designed to improve consumer protection for pension scheme members and maximise their eventual retirement income but it will involve significantly stricter oversight.

This will add to scheme costs and pensions advisers argue the likely bill — in time and money — will be too onerous for many companies running one of Ireland’s myriad pensions schemes.

“Proper supervision and value for money will not be achieved unless there is a much smaller number of larger, more efficient schemes,” pensions regulator Brendan Kennedy has said, adding that consolidating pension schemes is a top priority for the Pensions Authority. “Multi-employer master trusts are expected to be an important part of future pension provision.”


Irish companies are expected to be compliant with new pension regulations, which are based on an EU directive — the Institutions for Occupational Retirement Provision II (IORP II) — by the end of 2022. The rules already apply to any new pensions scheme established since the start of July.

Master trust

The onus of the new regulations falls on scheme trustees but a decision on a move to a new arrangement rests with the sponsoring employer.

Over half (55 per cent) of Irish employers surveyed by PwC are undecided on whether to move their workplace pension scheme to a master trust.

And more than four out of every 10 companies remain to be convinced that the move represents value for money even though one of the biggest selling points for master trusts is economies of scale.

A quarter of affected employers have not even considered how to address the changes and the costs involved and, in just over one in five cases, there has, as yet, been no engagement between pension scheme trustees and their sponsoring employer.

Industry experts remain puzzled and concerned at the lack of movement and scepticism regarding the new arrangements, warning that the current level of indecision has the potential to create “clear capacity issues [in the industry] later in 2022 as these decisions get made”.

Falling foul

“For many employers of scale and size who have a defined contribution pension scheme, a master trust solution holds significant attractions,” PwC pensions partner Munro O’Dwyer says.

But, he says, just months out from the introduction of the new regime, “There remains low levels of awareness of the detailed requirements and the impact of the new regulations.” Mr O’Dwyer warns that “falling foul of this legislation would be unhelpful and costly for employees and employers”.

He said three factors were critical to what a worker received on retirement — the contributions going into the pension fund, investment performance and low charges.

According to Mr O’Dwyer, Ireland accounts for half the pension schemes in the EU even though we have just 1 per cent of the population. He says as many as 66,000 of the 75,000 registered occupational schemes in Ireland have only one member. And a further 8,000 company schemes have fewer than 500 members — and an average below 20.

“With a master trust, the potential scale and investment expertise that can be harnessed can be expected to contribute to positive outcomes,” he said.

Dominic Coyle

Dominic Coyle

Dominic Coyle is Deputy Business Editor of The Irish Times