IORP II - Too distant for Trustees to worry about?
6th February, 2015
Trustees have a challenging job. In 2015 the challenges they will have to tackle will include the introduction of flexibility provisions to defined contribution schemes from April, and the potential impact of legislative change following the May general election. Combine that with a backdrop of low gilt yields pushing deficits higher in late 2014, and a direction of regulatory travel which brings trustees’ responsibilities into even further focus, and it is enough for many trustees to reach for a couple of paracetamol.
Largely since 2011, unnoticed by some (let’s face it, their work is far less headline grabbing than Steve Webb’s comments about buying a Lamborghini) the European Commission has also been busy, plotting the replacement to the Institutions of Occupational Retirement Provision (IORP) Directive first introduced in 2003.
Initially, IORP II did hit the headlines when it contained provisions akin to Solvency II for pensions – with schemes needing to be funded on a much stronger basis. Since those provisions were removed (in March 2014 it was announced that only provisions in relation to governance and disclosure would remain), trustees could be forgiven for diverting their gaze to George Osborne’s budget announcements of the same month, or indeed to the Command Paper on DC Governance and charging issued in October 2014.
However, IORP II is coming. The Latvian Government which has assumed the Presidency of the Council of the European Union is intending to pass the Directive in the first six months of 2015, with member states having two years to implement the operative provisions.
The UK is well advanced in terms of compliance. However, trustees will need to focus on a number of matters including:
– The provision of a Pension Benefit Statement for all members – including prescribed information. Expect a change to UK Disclosure Regulations.
– The need for all trustee boards (note the collective Board, not the individuals) to have adequate relevant qualifications, knowledge or experience.
– Remuneration Policies – trustees need to disclose not only their own remuneration policies but also those of their advisers.
Europe is coming up the rails. Don’t take your eyes off of this horse.