1. The current position of pensions in the workplace
IPASS Annual Conference
12 May 2016
Tom Dunphy
Head of Compliance and Enforcement
The Pensions Authority
Good afternoon everybody and thank you for the opportunity to speak to you at your annual conference here in Croke Park.
I know I’m speaking to professional HR and payroll administrators here today. Some of you will also be employers and others will be pension scheme trustees and I hope a lot of what I say will be of interest to you in terms of the private pension environment and how to remain compliant with the various requirements.
But of course most of you are also members or prospective members of an occupational pension scheme and will see things from that side of the issue as well.
So I’d like you to hear this presentation wearing those various hats
That is one the one hand your role of making sure that the employer and trustee requirements are met in relation to pensions and
Being aware of the importance of your pension scheme to you personally when you come to retire.

2. Agenda The Pensions Authority and legal framework
Pensions landscape in Ireland
Key actors and responsibilities
Regulatory strategy and approach
Compliance experience in 2015 and regulatory priorities for 2016
New developments and planned reforms
To put my thoughts in context I’ll begin by giving an overview of the Pensions Authoriity and what it does. I’ll also give you a picture of what the current Private Pensions Landscape in Ireland looks like and the 3 main pension saving streams.
I will then briefly review the legal and regulatory framework for pensions and we’ll look at the role of trustees, registered administrators and employers.
We’ll then look at the PA’s regulatory strategy and approach to supervising the pensions sector and we will get an idea of compliance activity undertaken and enforcement experience from 2015.
We’ll also look at a couple of new areas we want to focus on this year.
I’ll finish by updating you on current pensions developments and where we might be going in the future, particularly in the defined contribution context. 1

3. Pensions Authority Established by the Pensions Act, 1990
Supervision, regulation and enforcement
Policy advice
Information and guidance
The Pensions Authority was established under the Pensions Act, 1990 and the powers and duties vested in the Authority derive from this legislation.
Our role is set out under S10 of the Act and can be broadly split into 3 main areas;
Compliance and enforcement of the provisions of the Pensions Act
Provision of pensions policy advice to Government
Provision of information to general public (including members, prospectivbe members and non-members) and the regulated community
This function includes an information and enquiries service for the public and also provides support and assistance in how to be in compliance with the requirements. 2

4. Our Vision and Mission
Vision: A pensions landscape where pension savings are secure, well managed and understandable and which encourages pension savings.
Mission:
Foster public confidence in pensions by regulating pension schemes and PRSAs effectively and efficiently.
Support pension scheme trustees and the public through provision of guidance and information.
Provide expert advice to the Minister for Social Protection to help inform policy development.
With these three fundamental tasks in mind, the current PA strategy 2016 – 2020 contains the aspiration that the work we do will lead to a pensions landscape where pension savings are secure, well managed and understandable, and which encourages pension savings.
To achieve this we intend to – foster public confidence through effective regulation of schemes and PRSAs, support trustees and the public through the provision of information and guidance, and advise the Minister for Social Protection on pensions policy.
We attach a lot of importance to our role in fostering trust and confidence in the pensions system. From a social policy perspective, we think it’s critical that people do have some form of supplementary income for retirement. However, it is a voluntary system and ultimately that’s a decision that people will take for themselves. However in our view they are much less likely to do this if they do not trust or understand the system. 3

5. Workplace Pensions - Legal Framework
The Pensions Act 1990 and Regulations
Trust Law and Equitable Principles
Scheme Trust Deed and Rules
Revenue Requirements
EU Law
Statutory Guidance
Legal Framework for Pensions
Raft of legislative provision that applies to pension schemes and pensions scheme trustees – there’s trust law and the trust deed which sets out trustee’s obligations, powers and procedures they must follow.
In general under trust law, trustees must ensure that they act prudently, responsibly and honestly, they act with reasonable care and in the best interests of beneficiaries and the must act in accordance with the trust deed. However the trust deed can’t contravene the provisions of the Pensions Act.
Revenue also have a role in granting exempt approval status to schemes, they have a joint role with the Authority in approving schemes and PRSA products. They impose maximum limits on benefits in order to grant the exempt approved status to pension schemes.
EU law there are directives such as the IORPS directives which Ireland must transpose via primary or secondary legislation. IORPS 2 directive is currently being negotiated in Europe. It’s a directive so there will be general principles that each member state must comply with but otherwise member states have some level of discretion in how they apply the requirements.
In terms of the legislation we’re concerned with, we have the primary legislation, the Pensions Act and secondary legislation in the form of regulations (set fees for example) and we also have statutory guidance which are signed off by the Minister for Social Protection and have force of law. These provide the framework for the Authority’s supervisory activity. 4

6. Powers of the Pensions Authority
Power to obtain information
Investigative powers
Fining and remedial powers
Prosecution powers
Powers exercisable through the High Court
Powers to suspend or withdraw approval for certain activities
Head in sand , always respond to comm, letter
Powers of the Authority
We have wide-ranging powers under the Pensions Act.
Power to obtain information – for example we can require anyone involved in the management of a scheme or providing services to a scheme to provide information on an ad-hoc basis and there’s also information that we require to be furnished automatically, a scheme annual return for example. A number of our prosecution cases each year are for the non provision of information requested. I suspect this is usually from inertia or hoping it will go away but I strongly encourage you to respond to any such request you might receive from us. More often than not the matter can be resolved without too much trouble but if there is no communication matters take their own course.
Investigative Powers – we can carry out investigations or inspections of a scheme, PRSA provider or registered administrator, that includes the power to and enter business premises and require persons on the premises to supply us with information, explanations, accounts, records including electronic records.
Fining and Remedial Powers – for certain offences, we have the power to issue fines and require an offender remedy the offence within 21 days.
Prosecution Powers – We take criminal prosecutions in our own right on a summary basis, or refer to the DPP on indictment.
Preventative and Remedial Powers – We can apply to the High Court to require persons to take particular actions or to refrain from taking particular actions in connection with a scheme or PRSA product. We may have to prove that there’s a potential risk to member benefits to do this.
Powers to suspend or withdraw approval for certain activities – we can impose restrictions on registered administrators, or refuse to renew their annual registration or prevent them from taking on new business. Suspend or withdraw approval for a PRSA product. 5

7. Supplementary pension provision in Ireland (as at 31 December 2015)
Defined benefit
715 schemes subject to the Funding Standard with 125,955 members (€58bn)
99 Unfunded PAYG schemes with 339,155 Public Service members
Defined contribution
67,125 schemes with 281,629 members (€37bn)
Personal Retirement Savings Accounts (PRSAs)
237,608 PRSA contracts (€5bn)
Personal Pension Plans/Retirement Annuity Contracts (RACs)
200,000 + contracts
The Private pension system in Ireland is Voluntary and is delivered through 3 vehicles;
Occupational pension schemes which are trust based
Personal Retirement Savings Accounts-(PRSAs) which are contract based
Personal Pension Plans/Retirement Annuity Contracts which are insurance products regulated by Central Bank. I only mention them here for completeness as they are part of overall private pension provision but can be disregarded for the purposes of this presentation
OPS include both Defined Benefit and Defined Contribution schemes.
PRSAs are entirely DC
There are 68,000 active schemes and PRSA products with a total membership of about 980,000,
Total assets under investment are in the order of €100bn.
While DC accounts for almost (all) 98% of schemes, it only accounts for 28% of total membership and 37% of total assets.
While DB only accounts for 1.4% of total scheme numbers, it has 49% of total membership and 58% of total assets. However, if we disregard the members of PS DB PAYG schemes, this 49% figure becomes 15%. So, funded DB membership stands at about 15% of total coverage.
PRSAs account for .6% of schemes, 24% of membership and 5% of total assets.
While most of the arrangements are DC, the majority of members and of savings are in DB. With the decline in DB almost all new provision is DC and so practically all new contributions are to DC arrangements.
So, a major regulatory challenge for us in Ireland is the very large number of small DC schemes – over 60,000 and 95% of these have less than 50 members. This has implications for the members, especially around charges, governance and value for money. It also has implications for the Regulator in terms of being able to properly regulate these schemes. We will discuss this later when we look at reform agenda.
I should mention that DB includes 339,000 payg public service members. Also, the asset figure €100+ bn.
We regulate 180,000 trustees connected to 160,000 schemes, 142 registered administrators, 131 prsa products managed by 14 PRSA providers.
with 100bn assets under investment. Supplementary pension coverage in the private sector stands at about 40% so about 60% of employees do not have private pension coverage. Public service coverage is 100% with membership a condition of employment.
So hopefully that gives you a sense of the current supplementary pension environment in Ireland and the regulatory scope.. 6

8. Occupational Pension Schemes Assets under investment
Pensions Landscape
Occupational Pension Schemes
Schemes
Members DC
67,125
281,629 DB
814
465,110
98%
Schemes/Products
68,070
0.6%
PRSAs
Products
Contributors
Std/Non Std
131
237,608
1.4%
Active Members
Total
68,070
984,347
984,347
PRSAs
Defined Contribution
Defined Benefit
The Private pension system in Ireland is Voluntary and is delivered through 3 vehicles;
Occupational pension schemes which are trust based
Personal Retirement Savings Accounts-(PRSAs) which are contract based
Retirement Annuity Contracts which are insurance products regulated by Central Bank. I only mention them here for completeness as they are part of overall private pension provision but can be disregarded for the purposes of this presentation
OPS include both Defined Benefit and Defined Contribution schemes.
PRSAs are entirely DC
There are 62,400 active schemes and PRSA products with a total membership of 960,000,
Total assets under investment stand at €91bn.
You can see from the charts that while DC accounts for almost (all) 98% of schemes, it only accounts for 27% of total membership and 37% of total assets.
While DB only accounts for 1.4% of total scheme numbers, it has 49% of total membership and 58% of total assets. However, if we disregard the members of PS DB PAYG schemes, this 49% figure becomes 15%. So, funded DB membership stands at about 15% of total coverage.
PRSAs account for .6% of schemes, 24% of membership and 5% of total assets.
While most of the arrangements are DC, the majority of members and of savings are in DB. With the decline in DB almost all new provision is DC and so practically all new contributions are to DC arrangements.
So, a major regulatory challenge for us in Ireland is the very large number of small DC schemes – over 60,000 and 95% of these have less than 50 members. This has implications for the members, especially around charges, governance and value for money. It also has implications for the Regulator in terms of being able to properly regulate these schemes.
I should mention that DB includes 339,000 payg public service members and there is an additional slide with this detail. Also, the asset figure €91 is as at 2014 closer to €105m now.
So that gives you a sense of the current supplementary pension environment in Ireland.
37%
Assets under investment
€100bn 5% 7

9. Trustee Responsibilities
Trust law
Act in best interest of beneficiaries
Avoid/manage conflicts of interest
Exercise utmost good faith
Not take personal gain
Execute the trust
Pensions Act
Ensure contributions are received
Proper investment of funds
Pay benefits
Keep proper records
Undertake training
Appoint a registered administrator
Acting as a pension scheme trustee is a very onerous task imposing a fiduciary duty to all scheme beneficiaries. Trustee duties derive from trust law and Trust law which covers trusteeship in the widest sense and also the Pensions Act which adds duties specific to the running of pension schemes. It is the scheme trustee who is responsible for the running of the scheme under the Pensions Act although the sponsoring employer and registered administrators also have some specific responsibility as well.
Trustee arrangements can vary from scheme to scheme but the majority of trustee boards are made up of individual or lay trustee members. The trust deed will typically grant the sponsoring employer the power to appoint trustees. In some cases a corporate body such as the employer or a professional trustee firm will be appointed. Any person can serve as a trustee provided they have never been convicted for fraud or dishonesty or are in undischarged bankruptcy.
Most of the trustees duties arise from the principles of trust law;
They must always act in the best interests of beneficiaries as a whole, this can be a challenge when you have a scheme with different classes of membership with different and sometimes conflicting interests. Example..
They should avoid conflicts of interest but clearly this will not always be possible and in such case they need to note and manage any conflicts that do exist.
They should act in good faith and not make a personal gain.
To execute trust faithfully and properly it is implied that they make themselves familiar with the trust deed and rules and also as non experts, they must take advice so that all decisions are fully informed. It is important that they can demonstrate efforts to familiarise themselves with the trust and to take advice.
Specific requirements under the PA include
Most of these could be implied in trust law in any case but are spelt out in the PA. The requirement to invest funds is very broad and S59 requires the trustees to invest the funds ‘properly’. It is correct that the legislation is not prescriptive in this area as each scheme will have its own investment priorities, liability profile and risk appetite. Therefore, to do this properly professional advice should always be taken. So the trustees retain full authority and responsibility for investment but the PA will want to see evidence of prudence including the retention of proper expert advice.
A very specific pension scheme trustee duty is the appointment of a registered administrator and more on this later.
Main Duties of Trustees under the Act
The Act mainly covers the duties of trustees, many of these duties are covered in Section 59 of the Act, but there are other requirements throughout the Pensions Act.
Section 59 duties
Ensuring that contributions are received and invested within prescribed timelines – that means they must be remitted within 21 days of month end and the trustees must then ensure they are invested within 10 days of that.
Proper investment of the scheme resources – so for example in a DB scheme, are they investing in a way that’s appropriate to the membership profile?
Making arrangements for the payment of benefits – benefits must be paid as they fall due, on retirement.
Keeping proper member records and financial records.
Undertake trustee training every two years.
Where a wind-up is taking place, they must ensure the scheme resources are applied in a timely way.
Ensure that all times a Registered Administrator is appointed.
Other Duties under the Act
Have to register the scheme with the Authority within one year of establishment and the pay fees due to the Authority.
Make appropriate arrangements for leavers, so transferring benefits out, refunding contributions or preserving a member’s benefits if they have more than two years’ service.
Disclosure of information to members, prospective members and others, so for example that could involve providing an annual benefit statement to members, or providing a scheme explanatory booklet to new joiners.
Producing a trustee annual report.
Ensuring the accounts are audited and that actuarial valuations and funding certificates are prepared.
Comply with the principles of equal pensions treatment – so make sure that members aren’t being discriminated against in terms of admission to the scheme, in particular that part-time workers aren’t being discriminated against.
Whistleblowing obligations in certain circumstances as I outlined earlier.
In practice, trustees will delegate many of these duties to an investment manager, or a registered administrator for example; however it is important to note that the trustees retain legal responsibility for those duties so they need to ask the right questions of their advisors to ensure their responsibilities are being fulfilled. 8

10. Registered Administrators (RAs)
Appoint an RA to provide core administration functions.
Core administration functions are:
preparation of scheme annual report
preparation of member benefit statements
maintenance of proper records
File Annual Scheme Information (ASI) return
Registered Administrators
Read from Slide. We regularly carry out onsite inspections of registered administrators, and we can prosecute or refuse to renew their registration, or restrict their activities if they fail to comply with the Act. 9

11. Employers’ Pension Obligations
Employer must provide all employees with access to some form of pension arrangement.
Access to a PRSA is required where
no scheme in place
scheme in place but restricted benefits and eligibility
Remit contributions
Arrange trustee training
Employer’s Pension Obligations
Must provide access to some form of pension provision- they don’t have to have an occupational scheme and they don’t have to contribute, but they must provide access to a PRSA where there is no occupational scheme in place, the scheme only provides death-in-service benefits, if the scheme does not permit AVC’s, or if members will not be eligible to join the scheme for six months, those all have to be provided with access to a standard PRSA.
Employers have to set up a standard PRSA with a PRSA provider, they have to make employees aware that there is a PRSA available, allow the provider reasonable access to speak with the employees and they have to provide reasonable paid leave to allow the employee to conclude a contract with a PRSA provider.
Obviously, where there is a scheme in place, the employer must deduct and remit the contributions to the trustees and provide certain notifications to the employee in this regard.
Employers are also obliged to arrange trustee training every two years for the trustees of their occupational schemes. 10

12. The Authority’s approach to regulation
The Authority’s allocation of resources is risk oriented on the basis of the following priorities: 1st priority: misappropriation of pension assets or contributions 2nd priority: lack of governance or maladministration impacting on benefits / failure to pay benefits due 3rd priority: defined benefit solvency 4th priority: failure to provide prescribed information to members 5th priority: failure by regulated entities to submit accurate and timely data to the Authority. This order represents the seriousness of the risks, not the likelihood of their occurrence.
The Authority’s approach to Regulation
Like most regulators, we apply a risk based approach to supervision to make the best use of finite resources:
So we assign our resources based on five key priories, the order represents the seriousness of the risks rather than the likelihood of occurrence.
1st priority: misappropriation of pension assets or contributions. We’ve prosecuted a number of employers for this in recent years, particularly in the construction sector.
2nd priority: lack of governance or maladministration impacting on benefits / failure to pay benefits due – that could involve a number of things: poor record keeping, lack of governance around how assets are invested, failing to actually pay benefits to members.
3rd priority: defined benefit solvency – ensuring trustees comply with the Minimum Funding Standard for example
4th priority: failure to provide prescribed information to members – Trustee annual reports, annual benefit statements
5th priority: failure by regulated entities to submit accurate and timely data to the Authority – Annual Scheme Information Returns is a big focus for the Authority at present. We rely on that information to supervise effectively. 11

13. Supporting Trustees
The Authority supports trustees in the following ways:
Trustee Handbook
Financial management guidelines for defined benefit schemes
Codes of governance for defined contribution schemes
Model disclosure documents
Information and guidance materials
Information and enquiry service
Register of trustee training providers
e-Learning facility for trustees
Supporting Tustees
We are cognisant of the voluntary nature of pension schemes and the challenges trustees, particularly lay trustees face – that’s why we prioritise the provision of guidance material to trustees and other regulated entities to help them achieve full compliance with the Act. To name a few: refer to slide.
The trustee handbook – really the trustees bible, sets out all the duties and responsibilities of trustees, it’s really essential reading for trustees.
The financial management guidelines sets out very practical guidance for trustees of Defined benefit schemes, for example how frequently they should assess scheme solvency, how often to review investment strategy and investment performance.
Codes of Governance for DC governance – we have six codes of governance that deal with all aspects of managing a DC scheme, will go into more detail on these later.
Model disclosure documents – these are basically templates for the disclosure documentation trustees are required to issue to members, all available on the website. Talk more about these later as well.
We have various guides and materials, booklets etc on our website.
Enquiry service, from 9 to 5.30pm Monday to Friday.
An e-learning facility, free – anyone here done it? 12

14. Supervisory activity in 2015
45 new investigations opened into various alleged breaches of the Pensions Act.
66 investigations finalised and closed during the year
4 onsite inspections of Registered Administrators (RAs) carried out
60 meetings held with trustees, pension providers and public service administrators to discuss a range of compliance issues.
225 schemes audited for compliance with various obligations under the Pensions Act
5 schemes and their respective trustees underwent a comprehensive review by the Authority of the stewardship and administration of their schemes 13

15. Enforcement activity - 2015
37 prosecution cases were taken of which;
22 Convictions
4 Probation Act
10 Struck out (on payment of arrears following summons)
1 Successfully appealed
Fines imposed €38,890.
The convictions in the 22 cases were as follows:
14 cases related to the deduction and non-remittal of employee pension contributions to schemes (Section 58A(1))
4 cases related to the non-remittal of employer pension contributions as obliged under the scheme (Section 58A(2))
4 cases related to failure to respond to a statutory request for information from the Authority (Section 18).
High Court Order granted to remove a trustee and a subsequent appointment of a replacement trustee.
37 prosecutions last year, with convictions in 22 cases. Total fines of almost €40,000. Mainly related to construction sector, failure to deduct and remit employer or employee contributions or to respond for information.
We also obtained a High Court Order to remove a trustee company from a scheme and appoint a new trustee where we had reason to believe the member’s interests were at risk, on foot of a whistle blow from an employee. It was actually the first time we had used these powers. We also withdrew RA status from the entity concerned.
In 2015 we recovered €x on behalf of pension scheme members. This activity will hopefully deter people from acting inappropriately with pension schemes funds which is important as the system is one of people looking after other peoples money.
Hopefully this gives a flavour of the supervisory activity we undertook in 2015 and the resulting enforcement of compliance through the courts. 14

16. Regulatory priorities for 2016
Investigating complaints and reports
Continuation of the varied programme of proactive compliance activity, including on-site inspections of administrators, themed compliance audits and engagement with schemes
Commencing on-site PRSA inspections (second half of 2016)
Reviewing scheme governance and oversight
Improving data filing (ASI) compliance
Identifying and regularising the position of excluded employees
Priorities for 2016
Specifically for this year, we will be continuing our proactive supervisory activity as for 2015.
However, I would like to draw your attention to some new areas we have begun to examine in 2016.
Scheme Governance
As part of our scheme administration review programme we will be including an element to examine the quality of scheme governance. This will involve looking at the scheme’s
Governance Plan of Action and procedures for
Trustee Meetings
Managing Conflicts of Interest
Collection and Remittance of Contributions
Investing Scheme Assets
Paying Benefits
The PA has recently published six codes of practice to assist trustees in these matters and they are on our website for reference.
Data filing to the P Authority
The PA places huge reliance on data and must do to regulate effectively. A key filing requirement is the Annual Scheme Information report and it is the duty of the trustee through the RA to do this. We have been less than satisfied with compliance in this area and we have set up a specific project team to address this.
Excluded employees
I’ve already mentioned the requirement for employers to ensure all members of staff are given access to a pension scheme or PRSA. We have begun a project to examine compliance levels in this area.
So these are areas of compliance monitoring activity we are now engaged in. 15

17. Background to reform Charges not transparent and high Too many schemes
Too many trustees
Multiple pension products/complexity
Low coverage
Before I wrap up I want to very briefly touch on the issue of reform. There is a huge reform agenda but I can only touch on it here today.
First of all I want to give some background to the need for reform in the pension system and particularly in defined contribution schemes.
Charges
In October 2012, in response to concerns raised regarding the level of charges levied on pension schemes and PRSA contributors, the Department of Social Protection commissioned a Report on Pensions Scheme Charges in Ireland. A key objective of the research was to identify the total impact of charges over the life of the scheme and not just to identify headline charges and percentages. This initiative was clearly driven by consumer protection and value for money concerns.
Key findings included a lack of transparency of how charges are calculated, undisclosed charges, poor trustee knowledge or understanding, and the disproportionately high burden of charges on small schemes. In response as regulator, we have inserted new guidance on charges for consumers into trustee and member guidance material and on the website. We also carried out a special audit of PRSA charges last year. Charges and fees continue to be a very live issue.
Too many schemes
We have already seen that for a country the size of Ireland we have far too many schemes. In fact while Ireland accounts for 1% of the EU workforce, it has x% of the schemes.
Too many trustees
There are about 180,000+ trustees connected to about 160,000 schemes.
There are multiple pension products which while perhaps offering more choice, also introduces too much complexity. 16

18. Planned reforms Reform of DC Simplification Auto-enrolment 17
As I have said, the Pensions Authority is currently developing proposals for major reform including the reform of DC – mainly reducing the number of schemes to between , the simplification of the rules around pensions to make it easier for members and potential members of schemes to understand pensions. All of this will be subject to the Government accepting our proposals.
The Authority will be running a public consultation on these issues later this year and I would encourage everyone to tap into this and to have your say.
Finally, alongside the Authority’s proposals for reforms the Government is also considering some form of auto-enrolment whereby those in the workforce without a pension would be automatically enrolled into one. Experience in the UK shows that HR and payroll administrators are actively involved in the technical implementation of AE there and are have been recognised as crucial to the success of this process. 17

19. For further information
Pension calculators
Free Online Trustee Training, Guidance & FAQs, alerts & Trustee supports
Information and Guidance
Pension checklists
Enquiry service 18