Gerald Nash (Louth, Labour)
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644. To ask the Minister for Employment Affairs and Social Protection her views on a 2014 OECD report (details supplied); her further views on its finding that current pension fee caps are substantially above the charge levels observed in the best performing countries such as Denmark or Sweden in which total management fees are below 0.5% of assets under management; and if she will make a statement on the matter. [21373/21]

Gerald Nash (Louth, Labour)
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645. To ask the Minister for Employment Affairs and Social Protection her views on a 2012 pension report by her Department (details supplied); the steps she has taken and plans to take to address these findings; and if she will make a statement on the matter. [21374/21]

Heather Humphreys (Cavan-Monaghan, Fine Gael)
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I propose to take Questions Nos. 644 and 645 together.

The OECD Review of Pensions Systems: Ireland Report (2014) was commissioned following a request by the then Minister for Social Protection in response to the Pension Charges in Ireland Report (2012). 

The 2014 report references the Pension Charges in Ireland Report (2012), and confirms its conclusions that whilst the Irish pension industry charges are not excessive compared to other countries’ benchmarks for large DC occupational schemes, they are relatively expensive for small occupational schemes and personal pension schemes.  

In this regard, there are a number of measures that the Department, and successive Ministers, have advanced since these reports were produced.  These are in addition to significant developments at European level.  The combination will, over time, have an impact on improving governance, rationalising the pensions market and facilitating economies of scale, resulting in better outcomes for consumers, including in the area of pension scheme charges and transparency.  

On foot of the 2012 report, the Central Bank carried out a number of themed reviews aimed at ensuring implementation of the requirements of the Consumer Protection Code.  This included a review of annual pension statements to confirm that information on charges is being provided in a way that seeks to inform the customer.  

The Pensions Authority updated its trustee training material and information on its website on pension charges for scheme trustees and consumers.  The Authority also released a revised edition of the Trustee Handbook which includes dedicated information on fees and charges and trustee obligations in this regard. 

In 2016, the Pensions Council published its report on Approved Retirement Fund (ARF) Charges and in 2017 published reports on Buy-Out-Bond (BOB) Charges and a further report on both ARF and BOB charges. The Council's work has informed the Roadmap for Pensions Reform 2018-2023, the development of the Automatic Enrolment Programme and the Interdepartmental Pensions Reform and Taxation Group (IDPRTG).

At my request, the Pensions Council is currently considering the merits of introducing an initiative similar to the Cost Transparency Initiative in the UK for pension providers in Ireland and has been asked to consider whether such an approach is effective on a voluntary basis, as in the UK, or operates better on a mandatory basis, such as in Denmark and in the Netherlands.

The Roadmap for Pensions Reform 2018 - 2023 highlights the very large number of private pension schemes in Ireland and how this is a contributing factor in the level of professional fees charged to these schemes both for administration and investment advice.  It sets out a phased approach to reforming the pensions market, especially with respect to the rationalisation of pension schemes which it is anticipated will contribute considerably to lower pension costs and charges in the future.  For example, there are approximately 160,000 schemes on the Pension Authority’s Register including occupational schemes, AVC schemes, Trust RACs and Death Benefit Only schemes.  The consolidation of small DC schemes and single member schemes into larger schemes (including into master trusts) will be a key driver of change with regards to scheme governance and achieving economies of scale in the Irish pensions market.  It should also result in considerably reduced administrative costs for such schemes. 

The Pension Charges in Ireland Report (2012) stated that "the proposed introduction of an auto-enrolment pension scheme for all employees may be the most effective way to introduce change and could have a major impact in reducing charges, particularly for those people with small pension funds and reduced pension expectations. International experience has shown that this type of scheme is extremely successful in providing a simplified and lower cost charging structure and a consistent application across employers." 

In line with the Roadmap for Pension Reform 2018 – 2023, the Government has committed to develop and introduce an ‘Automatic Enrolment’ (AE) supplementary retirement savings system.  My Department is currently working on design proposals for such a system.  The Programme for Government further commits that there will be a charges cap imposed on AE providers.  

I recently signed the Regulations to transpose the IORPS II Directive into Irish law.  Alongside the many reforms introduced by the Directive in the area of pension scheme governance, the Directive also provides for additional disclosure requirements in respect of fees and charges.  Pension Schemes are now required to draw up a clear and comprehensive Pension Benefit Statement for members containing “a breakdown of the costs deducted by the scheme or trust RAC at least over the last 12 months” and “written in a clear manner, using clear, succinct and comprehensible language, avoiding the use of jargon and avoiding technical terms where everyday words can be used instead.” 

The Interdepartmental Pensions Reform & Taxation Group (IDPRTG) published its Report on Supplementary Pensions in November 2020.The report presented a number of recommendations to help advance the goal of simplifying and harmonising the supplementary pension landscape which will reduce complexity, enhance market competitiveness, drive product efficiencies and in turn lead to better retirement outcomes for pension savers.  An implementation group is actively working on the IDPRTG Report’s recommendations. 

It is acknowledged that improving the transparency of pension costs, rationalising the pensions market and improving scheme governance will drive price competition and lead to better outcomes for consumers.  My Department continues to progress several key initiatives which will help to achieve this. 

I trust this clarifies the matter for the Deputy.