Joan Burton (Dublin West, Labour)

The changes to the Pensions Act mainly arise from the requirements to implement Article 17 of Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision, or the IORPS directive. The Pensions Act is also amended to clarify the responsibility of the Pensions Board in respect of the certification of certain policies or contracts of assurance under Part IV A of the Act.

Article 17 of the IORPS directive is designed to ensure a level regulatory playing field between insurance companies and institutions for occupational retirement provision, that is, pension schemes, which offer similar pension products. Insurance companies that offer pension products which underwrite death or disability benefits or which provide guaranteed benefits are required under their regulatory framework to maintain additional solvency margins. Such additional solvency requirements do not currently apply to institutions for occupational retirement pension provision offering similar products.

The purpose of Article 17 the IORPS directive is to ensure that institutions for occupational retirement provision are required to meet the same additional solvency margins as insurance companies offering the same products. Article 17 of the IORPS directive provides that where a pension scheme or trust retirement annuity contract itself - not the sponsoring employer - underwrites death or disability benefits - known as biometric risks - or guarantees a given investment performance or a given level of benefits, that scheme or trust RAC must hold a buffer of additional assets over and above the scheme or trust RAC's existing statutory funding obligations.

Schemes and trust RACs which underwrite biometric risks or provide guarantees as set out above are defined as "regulatory own funds schemes" and "regulatory own funds trust RACs" respectively. A regulatory own funds scheme is required to meet both its existing statutory funding obligation and additional solvency margin requirements.

Chapter 2 of Part 4 of the Bill makes the necessary amendments to the Pensions Act 1990 to implement Article 17 of the IORPS directive. However, it is expected that there will be few, if any, pension schemes in Ireland that function in the manner described in Article 17 of the directive. We are required by European law to commit the directive into Irish law, even if the indications are that there will be few, if any, pension schemes in Ireland that function in the manner set out in the directive.

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