Pensions Update Winter 2022

Welcome to our Pensions Update for Winter 2022

With the fast approaching IORP II deadline looming just over the horizon, our Pensions Update reminds employers and trustees who are not planning to enter the IORP II universe what they need to do before 31 December 2022.

Winding up your scheme – What steps do you need to take before 31 December?

The 1 January 2023 deadline for full IORP II implementation is approaching.

For those employers and trustees who are not planning to continue with a stand-alone pension scheme in a post IORP II world, certain minimum actions needs to be taken prior to the 1 January deadline.

Defined Contribution Schemes

For employers with a defined contribution scheme, the obvious alternative to IORP II compliance is to join a suitable master trust and then wind up the existing scheme. The Pensions Authority has recognised that this is not a quick or simple process and has provided a 12 month window for employers to complete the transition.

To avail of this window, the Authority has stated in recent news alerts that a “formal commitment” must be made before 1 January 2023 to wind-up the existing scheme “and transfer the assets of the scheme to a master trust or to PRSAs”. The transfer can then be completed, and the scheme wound up, by the end of 2023, rather than the scheme having to be IORP II compliant from 1 January 2023.

The Authority has further clarified that “a formal commitment would include a written instruction from the employer to the trustees to wind-up the scheme, or a notification from the trustees to the members notifying them of their intention to wind-up the scheme”.

This is helpful, but the reference to only transferring scheme assets to a master trust or PRSA is potentially problematic. The trustees may wish to transfer the scheme assets to other pension vehicles, such as a former employee’s new employer scheme, or a personal retirement bond, which are permitted options under the Pensions Act. Trustees considering such alternatives should take advice on their feasibility.

Defined Benefit Schemes

For employers with a defined benefit scheme, the only alternative to IORP II compliance is to wind up the scheme. Whether this is a feasible option will depend on the circumstances of the scheme.

The Authority has issued no separate guidance for defined benefit schemes, which presents potential difficulties with the “transfer the assets of the scheme to a master trust or to PRSAs” aspect of the Authority’s guidance. Employers and trustees of defined benefit schemes which are intending to wind up should take advice on what they need to do prior to 31 December 2022 if they do not intend to achieve IORP II compliance.

One Member Arrangements (“OMAs”)

Since 1 July 2022, all OMAs set up on or after 22 April 2021 must comply fully with IORP II. In guidance provided by the Pension Authority at the end of September, the Authority stated that it would not require the trustees of OMAs established on or after 22 April 2021 to prepare an annual report and audited accounts in cases where a formal commitment to wind up the OMA and transfer the OMA's assets to a master trust or PRSA has been made, provided that:

• a formal commitment has been made by the trustees before 31 December 2022 to wind up the OMA; and
• the OMA is wound up no later than six months after the formal commitment has been made. 

Update on Finance Bill 2022

The Finance Bill 2022 has completed the Final Stage on 13 December 2022, but has not yet been enacted. It is anticipated that it will be signed into law on or before 25 December 2022, in line with previous years. The PRSA tax reforms highlighted in our recent briefing remain part of the Bill.