John Geraghty is a Business Development Consultant
The Pensions Authority expects all schemes to be fully compliant with all IORP II requirements by 1st January 2023. Many businesses have still not made important decisions on the future operation of their pension schemes even as the January deadline for compliance with the IORP ll deadline looms.
An annual compliance statement (ACS) must also be prepared by no later than 31 January each year in respect of the preceding year. The ACS must be certified for accuracy and completeness by at least two trustees or, in the case of a corporate trustee, by at least two directors. It is vital, therefore, that employers and trustees consider their options and agree an appropriate plan to approach IORP II.
For those employers that have not already done so, they will need to decide urgently what the best solution for their defined contribution scheme is. They can continue their own scheme in its current format and support the implementation of the IORP II requirements having regard for the enhanced levels of governance and compliance along with the additional cost for them as sponsoring employer.
Alternatively, they can consider whether an alternative pension arrangement, such as a multiemployer arrangement (or a master trust) would be a more appropriate and efficient solution.
Multi-employer arrangements are a bundled, fully outsourced solution – everything is done centrally on behalf of the employers who participate. The primary benefit therefore is economies of scale, reducing costs and delivering time efficiencies associated with running a defined contribution pension plan, without sacrificing quality.
Right now, your immediate focus is to be fully compliant with all IORP requirements by 1st January 2023 and preparing and signing your 2022 annual compliance statement by 31st January 2023.
Many employers and trustees will already be working on this, however, if you have any queries or are unsure of what you need to do, please contact us, we would be happy to help.
Auto-Enrolment the suitable option for your staff?
The government’s new auto-enrolment scheme has been described as a ‘once-in-a-generation’ pension policy. As the only OECD country without a mandatory retirement savings system, Ireland is playing pensions catch-up with most of the developed world.
From 2024 employees aged 23-60, and earning over €20,000, who are not already enrolled in an occupational scheme will be automatically enrolled and will have to opt out if they wish to leave. Workers will have their pension savings matched on a one-for-one basis by their employer. The State will also provide a top-up of €1 for every €3 saved by the worker.
Proposed contributions are as follows:
| Years | Employee | Employer | State | Total |
| 1-3 | 1.5% | 1.5% | 0.5% | 3.5% |
| 4-6 | 3% | 3% | 1% | 7% |
| 7-9 | 4.5% | 4.5% | 1.5% | 10.5% |
| 10+ | 6% | 6% | 2.0% | 14% |
*Employer contributions and the State top-up will be capped at a maximum €80,000 of an employee’s gross salary.
Issues have arisen with the initial low level of pension contributions, individuals cannot make additional voluntary contributions (AVCs) and employers will not be able to contribute more within the auto-enrolment system than the stipulated maximum.
Under the auto-enrolment system, the State subsidy of 33% of the employee contribution equates to 25% tax relief. By comparison, occupational pension scheme savers receive income tax relief on pension contributions at their marginal tax rate (i.e. 20% or 40%).
In CPAS we believe, while auto-enrolment will increase the number of people saving, the proposed system’s inflexible contribution rate and tax relief make it a less attractive proposition and construction companies may be better suited setting up an occupational pension scheme rather than being auto-enrolled into the state scheme.
CPAS can help your company navigate through an ever-changing pension environment. If you are concerned about your IORP II obligations and auto-enrolment and what it means for you and your organisation, please do not hesitate to contact our dedicated team on 01 2234947 or email [email protected]
