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This article can be accessed by clicking on the following link:

http://www.mhc.ie/latest/insights/going-dutch-problems-concerning-increasing-the-state-pension-age?utm_source=Newsweaver&utm_medium=Newsweaver&utm_campaign=Newsweaver

New initiative will support increased consumer protection in €100 billion industry

The Institute of Pensions Management (IIPM), has undertaken a major initiative to facilitate upskilling of lay pension trustees, many of whom act in a voluntary capacity, who are part of the oversight process of some 61,000 pension schemes nationwide. While the pension industry is heavily regulated, there is currently no requirement for the 180,000 lay trustees in Ireland to hold a relevant pensions management qualification in an industry which has approximately €100 billion of assets under management on behalf of 400,000 scheme members.

The IIPM believes to truly serve pension scheme members trustees must understand the broad range of complex issues such as legal, actuarial, tax, investment, governance and risk management. Through appropriate upskilling these trustees will be better placed to challenge, assess and manage schemes more effectively. In order to develop the appropriate skills required to achieve this the IIPM has established the ‘IIPM Law and Governance Programme for Trustees’:- a programme of professional accreditation for lay trustees developed in association with National College of Ireland. Details of the new programme will be announced this week at the IIPM conference Empowering Trustees for Better Member Outcomes, with speakers from Ireland and the UK.

Ahead of the announcement, the prospectus for the IIPM Law and Governance Programme for Trustees was presented to the Tánaiste and Minister for Social Protection, Joan Burton T.D., who welcomed the initiative to provide a certified qualification for lay pension trustees.

Speaking about the initiative, Rose Leonard, President of the Irish Institute of Pension Management said: “With assets under management of approximately €100 billion, Irish pension schemes play a central role in Ireland’s economic and social life. We are fortunate that by far the majority of trustees, who are either employer nominated or member elected, act with integrity and independence in the best interests of pension scheme members. However, given the scale of the industry and the crucial importance pension funds play in providing income for retirees there is a consumer protection imperative to ensure that those acting in an important oversight role have the necessary skills to perform their role as trustees. There are similar parallels to be drawn with the focus in recent years on upskilling non-executive Directors who play a key oversight role in corporate governance. Upskilling of lay trustees can only serve to improve governance in the pensions industry and help maintain the highest standards for members, while creating further confidence within the sector.”

Commenting on the introduction of the IIPM’s new professional programme, Brendan Kennedy, Pension Regulator, Pensions Authority said: “Improving trustee standards of education is an important part of the Pensions Authority’s objectives. We therefore welcome the introduction of the ‘IIPM Law and Governance Programme for Trustees’ as a very positive step in this direction and we hope that many trustees take advantage of this opportunity to enhance and develop their knowledge and understanding of pensions in the interests of the members whom they serve.”

The Pensions Ombudsman, Paul Kenny added: “I am very pleased to learn about the forthcoming launch of the ‘IIPM Law and Governance Programme for Trustees’. The pension environment is increasingly complex and the burden of regulation increasingly heavy. I believe that this programme will be a valuable support, particularly for lay trustees, whether member-selected or employer-appointed, which will enable them to continue to play an active role in the governance of their schemes, by broadening their understanding of the many and varied aspects of their duties and responsibilities.”

Full details of the ‘IIPM Law and Governance Programme for Trustees’ are available on www.iipm.ie

About the qualification

The IIPM Law and Governance Qualification for Trustees.

The qualification offers trustees the insights and understanding required to carry out their roles effectively. Touching on the many aspects of pension schemes, the programme will focus on the building blocks for implementing good scheme governance and risk management.

The programme covers the core areas of trustees responsibilities imposed by both legislation and social needs and it examines the liabilities they face, compliance issues and the need for proper risk management. Trustees will have a deeper understanding of how risks can be mitigated through the implementation of good practices and procedures. Issues will be examined for both ongoing schemes and those in the process of wind-up.

Download Programme (click on image below):

The document can be accessed by clicking this link: http://www.williamfry.com/newsandinsights/publications-article/2016/01/21/high-court-refuses-to-look-behind-pensions-ombudsman-ruling

This document can be accessed by clicking the following link: http://www.williamfry.com/newsandinsights/publications-article/2016/01/21/trustees-can-consider-employer-s-interests

The decision of the High Court in the Omega Pharma case must be considered by trustees and employers dealing with the wind-up of a defined benefit scheme.  Click on the link below for a full summary of the case.

http://www.aonportal.ie/consulting/attachments/spotlight_issue53.pdf

The “Omega Pharma” case – upheld by Court of Appeal

The decision of the High Court in the Omega Pharma case was appealed by the company, and at the Court of Appeal hearing in November 2014, the appeal was dismissed.  The written judgment which was issued on 10 February 2015 addresses the two grounds of appeal:

• The Scheme documentation should have been interpreted as requiring the Scheme to be wound-up at the start of the notice and hence the contribution demand was invalid: the Court of Appeal decided that the documents should be read as providing for the wind-up to take place at the end of the notice period (in any event the employer had given three months’ notice in the letter of termination)
• The correct measure of any shortfall on wind-up was the statutory minimum funding standard (MFS), and as the Scheme satisfied this, no further contribution was required: the Court of Appeal rejected this view as the rules required that the Trustees should have sufficient funds to provide the benefits under the Scheme.Hence the High Court decision that the employer was liable to pay the contribution demanded by the Trustees, even though the Scheme met the MFS, was upheld. Whilst this decision reflects the circumstances of this case, and the provisions of the Scheme rules, it reinforces the need for Trustees of a DB scheme which is being wound-up to consider what powers they have under the scheme documents to seek additional funding, and to take legal and actuarial advice.

The following is taken from Industrial Relations news analysis in September 2015 by Coleman Higgins.

The difficulties that have arisen over the choice of investment advisors/funds in the new pension schemes at Aer Lingus and Daa arise from a novel attempt to involve trade unions in the pension investment management selection process.

Trade unions have always been involved in negotiating pension contribution rates and benefits and, with the defined benefit (DB) pension crisis of recent years, also reductions in benefits and transfer terms to new defined contribution (DC) schemes.

However, once employees’ and employers’ money has gone into the pension scheme, decisions on how it is invested have traditionally been left to the trustees and the pensions industry, who try to get the best return for the scheme’s members.

Several years ago, SIPTU’s aviation pensions committtee, dissatistfied with the investment performance of the old IASS scheme shared between Aer Lingus and Daa, began to develop a Perfect Pension Partners Programme (PPPP), to select ideal invetsment managers for new planned DC schemes in both companies.

This consisted of meetings with a wide variety of pension providers, looking at their long-term performance, from which two investment managers were selected – Standard Life and Merrion Investment Managers.

Two “Pension Partners”

Since the trustee boards of both schemes were established earlier this year, SIPTU nominees on the boards have been argusing that these “pension partners” be considered for the shortlist.

The chairpersons of both boards have taken the traditional approach of selecting an investment advisor first, who looks at the needs of the individual scheme and comes up with a shortlist of potential investment managers.  The ultimate decision as to which manager to use is for the trustees, with the assistance of the investment advisors.

SIPTU’s pensions committee is understood not to be against the use of investment advisors to select an investment fund in this way, but is seeking more transparency for trustees in terms of how the scorinng system for selecting shortlists operates.  Also, while tradionally the investment advisor was always totally separate to the investment fund, in recent years some firms have been offering both services.  This has given rise to some concerns on the union side, which may or may not be justified.

Professional Advise

There is an obligation on trustees, if they are not themselves professional pension advisors, to obtain professional advice in the execution of their duties.

The Element Six pension judgement in 2014, although it involved a different type of trustee decision than choosing an investment advisor, made it clear that taking professional advice helped to protect trustees from legal action by scheme members that may later by unhappy with the result of their decisions.

SIPTU’s pensions committee has participated in many training events and seminars, building up a signifcant expertise.  While this may still not be seen as equivalent to the training received by those working in the pensions industry, it has meant a significantly greater engagement in pension issues, not just by the trustees, but also by other members of the union in terms of their awareness of how well their fund is doing.

The Pensions Authority, in a recent consultation paper on DC pension schemes, has called for significantly more education of trustees – a sentiment that the union side in the current row would agree with.

Duty to All

What may require more clarification is what level of involvement the union can have in relation to its nominated trustees.  Even though the trustees are nominated by the union side, they have a legal duty as directors of the trustee company running the scheme to have regard to the interests of all members – which includes not just active members, by also deferred and retired members.

Few would have difficulty with a union providing advice and training to its members who are trustees.  But the trustees still have to operate independently.  The questionn here is whether arguing to include on a shortlist investment funds that performed well in a union research project could be seen as somehow compromising that independence.  If those funds are indeed high performers, then all members benefit anyway.