As if construction businesses haven’t had enough to deal with in recent times between Covid-19, supply chain issues and labour shortages!
Hopefully the road ahead will be a bit smoother for your business, unfortunately that is unlikely to be the case in relation to your company pension scheme…
Why, what’s happening with pensions?
Over the next while, the pension landscape in Ireland and across Europe is about to undergo enormous change. This is as a result of the EU Directive IORP II that was transposed into Irish law at the end of April 2021.
This will impact every employer with a pension scheme and indeed the Pensions Authority has been clear that the IORP II Directive is a watershed moment for Irish pensions by bringing “the most significant changes in at least a generation”.
What difference will IORP II make?
IORP II provides for EU-wide pension scheme standards including an effective system of governance, covering areas such as fit and proper standards for trustees; the appointment of key function holders for risk management, actuarial and internal audit; and new standards relating to communications with members, deferred members and potential members.
What this means is significantly more regulatory obligations and costs for pension schemes which may increase the cost of running a small scheme to a point where it may not be viable.
The likely result of this is a sea change in the pension landscape in Ireland where there currently are more than 100,000 pension schemes, the majority of which are one-person arrangements. The net effect of the new rules could well be to reduce that number to less than 200 schemes.
As an employer - what can I do to prepare?
IORP II is going to impact every employer with a pension scheme, and construction businesses will be affected as much as any other employer.
The impact is not simply around small schemes – a lot of larger schemes are assessing the impact of IORP II and employers are concluding that while they want to provide a high quality pension scheme for their employees, they don’t want the risks or costs associated with complying with the new regulations nor have they the time to ensure that these new regulations are complied with.
This change is coming...…now is the time to :
Get familiar with the legislation and what it means for you and your existing scheme.
Review your current governance structure and assess how it measures up to the new legislative requirements.
Feel free to chat to the team in CERS to understand the likely implications for your company pension arrangement.
Could CERS be a solution for you?
The probable outcome of a smaller number of much larger schemes means that multi-employer pension schemes are likely to be a key element of the solution. This will allow costs of managing a single scheme to be spread across many employers / members and to centralise the regulatory obligations.
A master trust like CERS is a practical solution to helping employers in the construction and related sector to continue to provide high quality pension provision for their staff, without having the headache and risks of complying with the new regulations. For both smaller and larger employers, the advantage for them is having the peace of mind of knowing they have best in class governance and expertise available to them in CERS.
As the CERS master trust is an umbrella scheme offering a single trust containing multiple employer pension arrangements, it offers economies of scale when it comes to compliance with new regulations. The CERS master trust has a single Trustee board which have significant experience and expertise. The Trustee select the administrator, investment managers and advisers who they believe are most appropriate for the members of CERS, and who will deliver the best outcomes for their members’ retirement savings plans.
Employers in the construction and related sector want high quality pensions for their staff. Having an opportunity to delegate that to an expert third party, at a lower cost for them and with a lower risk for them is a very attractive proposition.
So what happens now?
IORP II is going to impact every employer with a pension scheme. We are seeing evidence of a clear appetite in the market for master trusts. The industry is expecting a changed pension landscape with a vastly reduced number of pension schemes and increased regulatory standards. Employers are seeing IORP II not simply as a further regulatory change, but as the trigger for a decision around how they provide pensions to staff into the future.
If you would like some further information on how IORP II will impact your pension scheme please contact the team (firstname.lastname@example.org).