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The Social Welfare and Pensions Act 2005 (SWPA) was enacted on 13 March 2005. The SWPA, amongst other matters, amended the Pensions Act 1990 by inserting framework provisions for the purpose of implementing into Irish law the EU Pensions Directive 1 with effect from 23 September 2005. These are set out in a new Part XII of the Pensions Act. Regulations have now been passed which fully implement these provisions. New Regulations have also been made in relation to the Funding Standard and Disclosure. All of these new provisions impose additional obligations of which pension scheme trustees need to be aware. CROSS-BORDER PENSION SCHEMES The SWPA provisions relating to cross-border pension schemes are now in force.2 Additional detail regarding the requirements for such schemes is now set out in the Occupational Pension Schemes (Cross Border) Regulations, 2005 (the ‘Cross-Border Regulations’). The SWPA inserted a new Part XII into the Pensions Act, which allows employers based in Ireland to establish arrangements (or adapt existing arrangements) to permit inclusion of employees of subsidiary companies or businesses established in other EU Member States, which have also implemented the EU Pensions Directive. The SWPA also provides that Irish-based pension schemes that wish to operate across borders must obtain prior authorisation from the Pensions Board. Trustees of Irish-based schemes are also required to furnish information to the Pensions Board in relation to cross border employers. To be authorised, the Cross-Border Regulations require the trustees of a pension scheme to produce a statement of compliance with the provisions of the Pensions Act which require disclosure of information, trustee qualifications, remittance of contributions and actuarial funding certificates (AFC) (defined benefit schemes only). New defined benefit schemes have two years commencing from the date of their approval to produce an AFC; all other defined benefit schemes which have not given an actuarial funding statement of solvency in the last annual report have one year from the date of the application for authorisation to produce an AFC. The Cross-Border Regulations set out the information required to be given to the Pensions Board where trustees of an authorised scheme propose to accept contributions from an overseas employer. This includes a copy of the scheme rules, description of benefits under the scheme, the most recent AFC (defined benefit schemes only) and a list of the EU Member States in which the scheme operates. Irish pension schemes (in particular defined benefit pension schemes) may have members who work outside Ireland in the UK or another EU Member State. Trustees need to be aware that, technically, any such schemes are ‘cross-border schemes’ and should be in compliance with the Pensions Act and the Cross-Border Regulations. This would require, amongst other things, that any such schemes which are defined benefit schemes meet the funding standard. It is not clear at present how compliance can be achieved. As noted above, prior authorisation is required from the Pensions Board. Trustees can only be authorised to include members in other EU Member States which have also implemented the EU Pensions Directive. The UK, for example, has not yet fully implemented the Directive. TRUSTEE QUALIFICATION REQUIREMENTS The SWPA introduced qualification requirements with respect to trustees of pension schemes. The Occupational Pension Schemes (Trustee) Regulations, 2005 (the ‘Trustee Regulations’) provide detail with regard to those requirements. Trustees must either be able to demonstrate that they are suitably qualified and have appropriate experience relevant to investment of the scheme resources or else that they have contracted with suitably qualified persons for the provision of those investment services. In the majority of cases, it is expected that trustees will satisfy the new requirements by contracting the necessary experience. Investment management agreements with all managers used by trustees will be required. The Trustee Regulations provide that, if one trustee of a scheme possesses the necessary experience and qualifications, all the trustees of that scheme have satisfied the requirements. Given the number of occupational pension schemes in Ireland (currently in excess of 88,000), the Pensions Board is not in a position to pro-actively monitor compliance with the new requirements. It may be that trustees will be required to certify compliance on an annual basis. TRUSTEE INVESTMENT DUTIES The Occupational Pension Schemes (Investment) Regulations, 2005 (the ‘Investment Regulations’) provide that in relation to borrowing, trustees of a scheme may borrow money but only for liquidity purposes and only on a temporary basis. Trustees of a one-member arrangement may borrow money without restriction. A ‘one member arrangement’ is defined quite restrictively in the Investment Regulations. It means a scheme which has been established for just one person and which can only have one member. The new requirements are effective from 23 September 2005. This will affect the manner, for example, in which small self-administered schemes will be established. Section 59(1B) of the Pensions Act, as amended by the SWPA, requires that trustees of schemes (other than small schemes) must have a Statement of Investment Policy Principles (SIPP). A ‘small scheme’ under the Pensions Act is a scheme which has less than 100 members (that is, active members and deferred members). The Investment Regulations now confirm that the information required to be contained in a SIPP should include investment objectives, investment risk measurement methods, risk management processes used, and the strategic asset allocation implemented with respect to the nature and duration of pension liabilities. The new regulations apply from 23 September 2005. All trustees of schemes with 100 members or more at that date should, therefore, have adopted a SIPP. The new regulations also specify in detail the investment duties of trustees. For all schemes other than one-member arrangements, the Investment Regulations stipulate that scheme assets must be: (i) invested in a way which ensures security, quality, liquidity and profitability of the portfolio as a whole so far as is appropriate having regard to the nature and duration of the expected liabilities of the scheme; (ii) invested predominantly on regulated markets (EU or otherwise); (iii) be properly diversified in order to avoid risk to the whole portfolio; (iv) invested in derivatives only to the extent it contributes to a reduction of investment risk or facilitates efficient portfolio management. The Regulations provide ‘look through’ rules where assets are invested in insurance policies. New Regulations have also brought into force Section 59(2) of the Pensions Act. This Section makes provision for member-directed investment. Subject to compliance with Section 59(2), trustees will be exempt from liability for losses resulting from complying with such directions. It is at this stage unclear how trustees can reconcile a duty to ensure investments are ‘appropriate’ to the nature and duration of pension liabilities and at the same time permit member directed investment which may be contrary to that duty, for example, which permits concentration of investment in equities by a member close to retirement. An effect of the new requirements may in fact be to reduce the scope for member directed investment. FUNDING STANDARD The Occupational Pension Schemes (Funding Standard) (Amendment) Regulations, 2005 specify the additional factors which may be taken into account by the Pensions Board in granting any extension to the period of time within which the funding standard is required to be met. These are: adverse experience relating to price inflation or rates of interest; increases in pensionable earnings; payment of benefits (other than long service benefits). DISCLOSURE REGULATIONS The Occupational Pension Schemes (Disclosure of Information) Regulations, 2005 are comprehensive regulations which will entirely replace the existing disclosure regulations on a phased basis commencing 23 September 2005. In many respects the new disclosure regulations restate the existing regulations. There are, however, a significant number of new requirements. Trustees of defined contribution schemes will be required to have simplified actuarial valuations prepared. This will be a statement of the assets and liabilities of the scheme. As they are funded schemes, this is a requirement of the EU Pensions Directive. Trustees of all pension schemes, other than small schemes, must have the accounts of the scheme audited. Prior to the new regulations, trustees of defined contribution schemes did not have to do this. This new requirement applies for scheme years starting on or after 23 September 2005. Another new requirement is that trustees of defined contribution schemes must furnish members with a Statement of Reasonable Projection at least annually. This is a statement which specifies, on stated assumptions, the level of benefits which a member would reasonably expect at a specified date. Whilst this requirement applies in respect of scheme years commencing on or after 1 January 2007 for current members, these statements are required from 23 September 2005 in respect of any person leaving a scheme. CONCLUSION As will be seen from the above brief summary of the new regulations, pension scheme trustees are faced with significant new requirements many of which are applicable immediately. This underlines the importance of trustees obtaining appropriate and timely advice on all regulatory issues. Notes 1EU Directive 2003/41/EC. 2 The relevant Commencement Order bringing those provisions into effect was made 21 September 2005, effective 23 September 2005.

Brian Buggy is a Partner in the Employment, Pensions and Benefits Group at Matheson Ormsby Prentice.

I am retired since 2001 and a member of a defined benefit scheme. I used receive increases in line with the cpi but since 2007 I have received no increase and no communication. The sponsoring company still trades and the scheme has company and current employee trustees but they bat off requests for information. Am I due, at least, an annual report? Thanks, John McN