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In a previous article I outlined numerous legislative changes that have affected holders of pension plans over the last few months. If you are a member of a private sector Occupational Pension Scheme (also known as a Company or Executive Pension) you may have received a letter from your pension provider, or possibly from the trustee’s of the scheme, that may require some explanation.

By way of background, the changes that are happening are because of laws that now apply under a new system called IORP’s II. This is a comprehensive and wide-ranging suite of legislation that seeks to enhance and harmonise governance and management standards of occupational pension schemes across the European Union. It introduces new requirements for Irish occupational pension plans, both defined benefit and defined contribution, covering a number of areas including governance and risk management, plan management and member communications, and places pension plans, trustees and employers under far greater regulatory supervision.

Because of this, all new Executive Pension plans must be written under what is called a Master Trust. A Master Trust allows an employer to retain a high quality retirement savings arrangement for employees, while at the same time being able to outsource all aspects of management and regulatory compliance. Essentially, a Master Trust provides the same features as an Executive plan but removes much of the compliance responsibility from the employer.

However, IORP’s II does not just apply to new schemes, all the Executive Pensions in the EU will eventually have to be switched into Master Trust arrangements, some sooner than others. Plans that were set up after April 2021 are already in the process of being changed, so you may have received a Participation Agreement from your pension provider or trustees which you will need to sign to avoid your pension being in breach of the new rules. All older pensions have a deadline date of 2026 and will be moved gradually between now and then.

What is sometimes overlooked however in the panic to comply, is that moving your existing pension into a Master Trust may not be 100% the correct decision for each individual. It might be more suitable to switch to a PRSA scheme, or wind up the existing pension and transfer it to a Buy-out Bond, neither of which require trustee oversight. They are therefore exempt from IORP’s II, as the pension holder retains control over their own retirement pot.

Another factor to consider is whether there may be an advantage in terms of charges under a PRSA or Buy-out Bond, as they are usually available without a policy fee, or Pensions Authority fee. It is still unclear whether there will be further trustee costs imposed by the Master Trusts in the future, and question marks still hang over the ability to transfer out of a Master Trust without leaving service.

As always, it is best to seek advice from a trusted financial advisor before making decisions about your pension. Make an informed decision rather than letting the decision be made for you!

Sean Sweeney, QFA RPA is a Qualified Financial Advisor and Retirement Planning Advisor.You can contact him through John F. Loughrey Financial Services by telephone on 074-9124002 or by email on sean@jfl.ie