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It is not clear that there will be any immediate significant legal implications for Irish occupational pension schemes of the UK exiting the EU. However, the effect on the investment market and the continued uncertainty around Brexit is likely to have more immediate and significant consequences for Irish defined benefit schemes and their sponsoring employers.

Many Irish defined benefit schemes are struggling with funding proposals that have gone off or may go off track as a result of poor market conditions. In addition, funding difficulties (and their associated impact on IAS liabilities of sponsoring employers) may trigger fresh scheme reviews and renewed focus on liability (and volatility) management.

Trustees and sponsors will need to consider with their investment and actuarial advisers what can be done to mitigate the risk of continued poor market performance in light of ongoing uncertainty during the proposed transition period. As required by the Pension Authority’s financial management guidelines, an important step will be identifying the main risks schemes are exposed to and what contingency plans can be put in place to reduce any negative impact. A general review of the scheme investment strategy and investment options may also be warranted.Continue Reading Implications of Brexit for Irish Occupational Pension Schemes

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Since June 2012, under the Occupational Pension Schemes (Disclosure of Information) Regulations 2006, trustees of schemes which are subject to the statutory funding standard are required to submit an Annual Actuarial Data Return each year. Details of the Return are set out in the Disclosure Regulations which must be completed by the scheme actuary and submitted to the Pensions Authority within 9 months of the end of the scheme year.

In the period up to 31 March 2016, the Pensions Authority received 699 Returns and has now published a summary of the information. A copy of the summary is available here. Points of particular interest include:Continue Reading Pensions Authority releases statistics for defined benefit schemes

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At the Irish Association of Pension Funds Annual Investment Conference held last week, Brendan Kennedy, the Pensions Regulator, reiterated the Pensions Authority’s continued focus on good governance and its plans for ramping up the Authority’s programme of engagement with trustees of defined benefit schemes. This engagement includes continuing to invite such trustees to meet with…

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What is the Omega Pharma case?

The Omega Pharma case has confirmed that the scheme’s governing documentation and not the Pensions Act minimum funding standard determine the employer’s liability to contribute to defined benefit schemes on wind-up.

On 25 July 2014, Mr Justice Moriarty in the Commercial Court handed down judgment in the case of Holloway & Ors v Damianus BV & Ors [2014] IEHC 383 and found in favour of the trustees of the Omega Pharma defined benefit scheme in their claim for deficit contributions against the scheme’s employers. The trustees succeeded in obtaining judgment in the amount of €2,439,193.56 (inclusive of interest) against the employers. On appeal, the newly established Court of Appeal affirmed the judgment in favour of the trustees (Holloway & ors -v- Damianus BV & ors [2015] IECA 19).

If the Element Six case (Greene & Ors v Coady & Ors [2014] IEHC 38) was the most important pensions law case for trustees in the recent past, the Omega Pharma case was not far behind. The Omega Pharma case is also particularly relevant to employers who operate or participate in defined benefit schemes. However, a number of key issues remain unanswered.Continue Reading The Omega Pharma case – Trustee and Employer Guidance

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Two liability management options we are seeing considered more and more frequently by Irish sponsoring employers of defined benefit schemes are pension increase exchange exercises (where members agree to forego an entitlement to increases on their pensions in the future in return for something now, for example, a higher starting flat pension) and transfer out exercises (where members agree to an enhanced transfer value in lieu of a future pension promise and transfer out of the scheme).

The rationale for these types of exercises is that liabilities are crystallised at the inducement date and risk of future adverse experience (for example, higher index-linked increases than estimated or adverse investment experience) are eliminated from the scheme.  An enhanced transfer value will usually be more than the statutory minimum funding standard but less than the equivalent of the cost of buying out the pension with a deferred annuity.  The funding position of the scheme and financial position and prospects of the sponsoring employer will drive this.  A key risk, of course, is that members do not fully understand what they are being asked to give up and seek to challenge the inducement exercise in the future.Continue Reading Inducement exercises – Five common hazards

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Where a scheme is operated on an integrated basis, it reduces the pension entitlements of members to account for their State pension. A bridging pension is a supplemental pension which is sometimes paid to members who retire before the age at which the State pension is payable. Schemes may also reduce the contributions payable by…

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The funding difficulties facing defined benefit schemes in this country at the moment as well as the strengthening of the Pensions Act funding requirements and re-introduction of funding standard deadlines has seen both scheme sponsors and trustees adopt an increasingly more creative approach to satisfying statutory obligations as well as providing a sustainable basis for funding.  This might include putting in place security in favour of the trustees of the scheme, swapping equity for a scheme deficit (see, for example, the deal struck by UK company, Uniq with the trustees of its pension scheme in 2011 and the recent arrangement proposed by Independent News and Media Group to the trustees of its scheme where the scheme appears to have been offered a 5% equity stake in the IN&M Group as part of a broader deal around restructuring), revising the funding obligation or providing an unsecured parent company guarantee.
Continue Reading Creative DB scheme funding approaches – contingent assets and unsecured undertakings

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The current state of funding of DB schemes has pushed many of the sponsoring employers of these schemes to consider how to minimise their defined benefit liabilities and risks.  In order for the liability management process to be successful, a number of key stakeholders need to be managed.  These are: 

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Pension issues can be a major factor influencing merger and acquisition activity.  Companies may pull out of deals due to uncertainty around pensions (especially uncertainty over the funding of defined benefit plans).  Pension plan deficits are now part of corporate life and how the deficit and the other pension issues will be dealt with needs to be considered early on in the deal. Outlined below are five pension issues we have seen arise in recent transactions and some solutions found to deal with them.
Continue Reading Five Key Irish Pension Issues in Corporate Transactions

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The continuing economic crisis sees those with responsibility for pension schemes faced with a number of complex issues. There are a number of core issues which we are seeing consistently arise. These include the following:

  1. Check the Power of Amendment
  2. Check Employment Contracts
  3. Check the Effect of the Change
  4. Conflict, Confidentiality and Consultation
  5. Obtain Advice

Continue Reading Managing Occupational Pension Schemes in Crisis: 5 things to Consider