IORP II

What is IORP II?

IORP II is an EU Directive that set new requirements for occupational pension schemes. The legislation for this was passed into law in April 2021 in Ireland. It resulted in increased requirements of pension scheme trustees.  Without significant changes, pension schemes won’t meet these requirements. The enhanced administration, increased governance and ultimately the substantial cost to schemes means alternative options are worth considering for trustees and members.  

If you want more detailed information about these regulatory requirements, you can refer to Your guide to IORP II. 

This page outlines information relevant to group pension schemes with only one member.

Information for trustees

It’s important to keep member’s best interests in mind. You can choose from the options outlined below.  

1. Maintain the current scheme and take the necessary steps to become IORP II compliant. If this is the case then you must be compliant with IORP II Directive since 1 January 2023.  

2. If you don’t want to accept the additional responsibilities and costs associated with being IORP II compliant you can choose to wind up the existing scheme and transfer or assign the member’s policies to an alternative arrangement. The alternative options for schemes winding up include:

•  Transfer to another occupational pension scheme (including a master trust from another provider)
•  Transfer to a Personal Retirement Savings Account (PRSA) 
•  Transfer to a Buy Out Bond (BOB) 
•  Retirement, if circumstances are right 
•  Assignment of the existing policy to the member (where the scheme has one remaining member and contributions have ceased) 

Assignment of the existing policy to the member is an option available only to those one-member schemes where the member is no longer paying contributions and won’t be paying future contributions. The policy owner is currently the trustee, but once it is assigned, the member becomes the policy owner. 

If the assign to member option is chosen the  member must stop paying contributions to the policy and cannot restart contributions to the policy in the future. If they want to continue saving for their retirement, a new pension arrangement will need to be put in place for future contributions.

This option can be used for schemes invested in unit-linked investments, and those invested in with-profits.  

Why it may be appropriate for with-profits investments 

For members invested in with-profits, it allows them to remain invested in their current with-profits fund(s) and does not impact on any investment guarantees those funds may have.  

A unit price adjustment (UPA) is an adjustment which is applied to a member’s fund if they transfer out of the scheme before the normal retirement age. This would also apply in the event of a scheme wind up. This solution allows the current scheme to wind up and assign the policy to the member with no UPA applied.

Important considerations for Trustees, Employers and Members before choosing an option  

It’s important that you consider all options available to the scheme and discuss them with a financial adviser to make the best decision for the member. For schemes which are currently paying contributions to member’s policies, there are some important considerations if you choose to wind up the existing scheme and transfer or assign the member’s policy(s) to an alternative arrangement:  

If the member wants to continue to save for retirement, they’ll no longer be able to invest future contributions to their current policy or in Standard Life with – profits as these funds are no longer available to new investments so they’ll need to consider the cost of setting up a new policy, including ongoing charges, as well as the fund choice available to them.  

Some policies may have additional risk benefits, such as disability benefit, premium protection or life cover which will stop once contributions to the current policy cease. If trustees or members want to have these in place, they will need to set up a new plan before stopping contributions to the current policy. Trustees should speak with the member and the employer about what this means, if they want to avail of these features, if they can get cover elsewhere and the cost of setting up an alternative policy.  Any new policy will require details of the member’s health before providing cover and their age is also an important factor as it can impact on the availability and cost of cover open to the member. Standard Life no longer provides these type of policies.  

Next steps to assign the policy to the member

If you decide to assign the policy to the member, you’ll need to select the downloadable documents pack below. Trustees have been sent a copy of the relevant pack by post.

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Assigning the policy to the member  

If having considered all the options available you’ve decided, together with the scheme employer and your financial adviser you’d like to assign the policy to the member we’ve put together tailored documents to help you with this unfamiliar process. You’ll find them in the downloadable packs linked above.

Here's what you'll need to do: 

1.  Read the ‘Assigning a policy to a scheme member’ guide for more detailed information and to make sure you’re still satisfied this is the right option for your scheme.
      
2.  The ‘How to assign a policy to a scheme member’ will take you through the steps of how to assign the policy, provides details of the documents you need and what you’re required to do with them. A copy of everything you need is included in the downloadable pack.
    
3. Notify your member – You must give at least one month’s notice of your intention to wind up the scheme to satisfy the Occupational Pension Scheme (Duties of Trustees in connection with Bulk Transfer) Regulations 2009 & 2021. To help with this, we’ve drafted a template letter for which details what assigning a policy to the member means. You can tailor this for the member or you can write your own, if you prefer. You will need to allow the member to submit their observations within this timeframe and you will need to confirm by writing or electronic means that you have given their comments due consideration. Send this letter along with a signed copy of the Notice to discontinue contributions to the member. Do not skip this step even if contributions are not being paid. This is a legal requirement to formally begin the wind up of a scheme. 
    
4. Once you’ve completed these steps, there are a number of documents you’ll need to sign and return to Standard Life. These can be found in the documents pack which you can download above:  

•  a signed copy of the amendments to the scheme rules and policy provisions (which should be dated before the letter of notification to the member) 
•  a signed copy of the wind-up declaration
•  a completed confirmation of activity form, in which you have provided us with the member’s contact details including their address. We cannot complete this assignment without this information.  

You can return these to us by post to Standard Life, 90 Stephens Green, Dublin D02 F653 or by emailing customerservice@standardlife.ie 

Although the decision on how to comply with IORP II lies with the trustee, members and employers affected by this decision may wish to stay informed too.