14 August 2013

IPE: Irish regulator proposes minimum standards for DC

Trustees should also not be barred by scheme rules from switching investment managers and administrators, likely in an effort to prevent asset managers from launching master trusts to which they are the sole provider, according to regulation put out to consultation. It further proposed that funds would be expected to demonstrate their ability to provide benefits on an economic basis, a measure that could be used to force consolidation of smaller schemes.

Discussing the consultation paper, Pensions Board chief executive Brendan Kennedy said its results would inform a planned review of DC regulation "which may ultimately lead to proposals for legislative change".

The Board identified the number of trustees required to support the Irish DC system as a problem, estimating that around 200,000 people were charged with oversight of pension funds. "The Board does not believe it is realistic to expect all of these have enough knowledge and commitment and will fulfil their duties in a way that optimises the outcome for the members whose savings they are responsible for", the consultation document said.

The consultation also noted it would require trustees to show there are no conflicts of interest with the administrator or employer responsible for the scheme – the former likely again meant to safeguard against conflicts inherent in the master trust model with a captive asset manager. While not an outright licensing approach – something Kennedy had previously ruled out – the introduction of minimum standards is similar to the quality standards under consideration in the UK before funds can be used to accumulate dormant pots. Additionally, funds would be expected to show that their structure allowed "an economic means of providing the intended benefits" and ensure that trustees would be able to opt for the asset manager of their choice.

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