As it is now over seven weeks since the introduction of the IORP II legislation you would imagine that the industry would fully understand the implications of the legislation at this point. Unfortunately, it is likely that we will not have full clarity on the ramifications of this legislation until the end of the year or perhaps even later as we wait for the Pensions Authority to release further guidance.
For pension holders and financial advisors this uncertainty may prevent them from carrying out transactions that will save them money or make them money. For instance, pension clients that wish to transfer from one provider to another are currently hampered in doing so. Scheme administrators are unsure whether unregulated investments transferred from one occupational pension scheme to another occupational pension scheme will be affected by the new rules. In this situation there are two options:
- Firstly, if the transfer is not time sensitive it may be best to wait until clearer guidance has been received from the Pensions Authority.
- Secondly, if the transfer is time sensitive then moving to a Buy-Out-Bond (BOB) or a PRSA will ensure that the investments won’t fall foul of the new IORP II rules. For clients who wish to continue to fund schemes through their company, above the age-related percentage limit for tax relief on pension contributions, it will be possible to set up a new occupational pension scheme.
For pension holders who wish to invest new funds into unregulated assets through their occupational pension schemes, there is also much uncertainty. It is yet to be clarified if there will be a grace period for schemes that breach the 50% threshold due to normal market movements to allow them to rectify the situation in a timely manner. This uncertainty has led some providers to only allow a small fraction of the pension pot to be invested in property or other unregulated assets, while other providers have taken a more prudent approach and are not allowing any such investments until clarity has been received. As with the dilemma faced by pension holders who wish to change providers, the solution is the same, you can either wait for clarity or transfer to a BOB or PRSA.
Hopefully we will soon start to receive more clarity on these and other issues. In the meantime, while uncertainty prevails, the core message to pension investors is that with a little bit of planning and/or patience your financial advisor will be able to guide you through these new rules and facilitate the investments that you need with the scheme provider you desire.
Author: Eoin Hassett, Independent Trustee Company. For further information, please talk to your Financial Advisor or email firstname.lastname@example.org