Proposed Govt. changes to negatively affect thousands of private sector pension holders

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Louise O'Connor
Louise O'Connor signed this petition

Background

IORP II, an EU Directive, was required to be transposed into Irish law, and the laws of all EU Member States, by 13 January 2019. The Directive applies to funded occupational pension schemes and will impose onerous investment requirements on Trustees of these schemes.

The IORP II Directive allows scope for a ‘proportionate’ approach to be applied, with member states given the option to choose whether it will apply the provisions of the Directive to small schemes.

The first IORP Directive was implemented into Irish legislation in 2006. At this time, the Irish Government availed of the option to grant a derogation to small schemes, exempting ‘one-member arrangements’ from all but one of its provisions.

The 13th January 2019 deadline for implementation of IORP II into Irish legislation has now passed, with no legislation yet published. However, the Department of Employment Affairs and Social Protection (DEASP) have confirmed that there will be no derogation from new EU rules for bespoke executive pensions and small self-administered schemes.

The effect of this decision is that one-member schemes will be prohibited from borrowing over the long term and freedom to hold unregulated investments (including property) will be severely restricted.

Effect of the Government’s decision

Small self-administered pension schemes are used by many family-owned companies. Many of these schemes have just one member and are a popular way for business people, professionals and self employed  to keep control of how their retirement funds are invested. Implementation of the IORP II Directive without derogation for these small schemes is likely to have the following effects:

  • Consumer choice will suffer as a result of blanket implementation of this Directive.
  • Retirees are likely to be badly hit. Rent provides an income compared to zero fixed income returns. Pension property holders make good landlords. Pension rules require them to hold property long term. Because of the nature of Revenue rules, clients are not free to trade or to speculate. Pension investors are long term steady landlords who need the rental income to support their retirements. 
  • Thousands of private sector pension investors will be impacted: About 22,000 pension savers and retirees, with an average sized fund of about €400,000, which equates to slightly less than half a teacher's pension in terms of the income it would generate.
  • SME debt finance is likely to be impacted: Self-directed pension schemes have lent more than €250 million to small and medium-sized enterprises. Self-directed pensions supported Irish business when the banks did not.  
  • SSAPS invest more in Irish assets than insurance company funds – this decision could result in Irish funds effectively moving abroad.
  • Schemes are now effectively confined to investment in equities, as unregulated property will be restricted, cash gives no return and fixed income investment is not currently an option due to low yields and potential for interest rate increases.
  • More than 350 direct jobs will be under threat and many more indirect jobs.
  • Fees will increase for pension savers due to the additional administrative burden.
  • Investors will now look abroad for solutions.
     

What can be done?

This petition has been created by the Association of Pension Trustees of Ireland (APTI). APTI members provide services in relation to self-administered pensions; occupational schemes, Personal Retirement Savings Accounts, Approved Retirement Funds and Buy-Out-Bonds. Many of them are Pensioneer Trustees which is a status conferred by the Revenue Commissioners on individuals or firms with specialist knowledge in the area of pensions’ law and administration.

APTI believes in the right for pension investors to make their own choices with regard to investment. We believe that blanket roll-out of IORP II is contrary to the EU Directive and breaches the principles of better regulation (from the department of Taoiseach’s own website - necessity, effectiveness, proportionality, transparency, accountability and consistency).

APTI is supportive of better governance. We are specifically seeking to maintain consumer choice. IORPS II is intended to protect scheme members from the actions of others. Our clients do not want protection from their own investment decisions.

This decision has been made by the DEASP with no meaningful consultation process. No draft legislation has been published and the deadline for implementation of the Directive has now passed.

Please sign this petition asking the DEASP to reconsider their position and use the discretion given to them by the EU to grant a derogation from IORP II to one-member schemes.