Leading the way in an evolving pensions world (Sponsored)

Aug 01, 2019

Upcoming pensions reform sees plans being rationalised and customers becoming more engaged. New Ireland is leading the way during this transformation.

The pensions landscape is transforming and it is the view of Patrick Cosgrave, Head of Group Pensions with New Ireland Assurance, that the advent of auto-enrolment pensions coupled with very significant regulatory reforms will lead to fundamental changes in the pensions value chain.

“The reforms envisaged are very far-reaching, particularly in terms of the improvements to defined contribution schemes to ensure good governance, value for money and protection for consumers,” Cosgrave notes. “The biggest change is the proposal for an auto-enrolment pensions system. Other reforms include the simplification of the overall system, changes to tax reliefs, new rules around master trusts, changes to ARF rules, and so on.”

 A lot has happened in the last few years, but there are some worrying signs. “If you roll the clock back to 2018 and look at the publication by the government, Roadmap for Pension Reform 2018-21, you see the situation looked very different,” says Cosgrave. “There were a lot of dimensions to the Roadmap, and its publication was very welcome. There was recognition that various elements of the pensions system needed change and reform both to improve it and to ensure that every citizen can afford to plan for a comfortable retirement.

“A series of consultations kicked off the process,” he says. “This gave the pensions industry lots of opportunities to submit our opinions on the proposals to the Department of Employment and Social Protection (the Department) and the Pensions Authority. With only one or two exceptions, we have been met with radio silence. There are many things that should have been done but haven’t. For example, Ireland was meant to have legislated for the Institutions for Occupational Retirement Provision (IORP) II directive in January, but this has yet to see the light of day.”

IORP II

The IORP II directive aims to harmonise the governance and management of pension schemes within the European Union and introduces several important new requirements for Irish schemes in areas such as governance, management and member communications.

It was also seen as a driver for the much-needed rationalisation of pension plans in Ireland. Instead of tens of thousands of schemes, many with a handful of members and potentially high regulatory cost burdens, the Pensions Authority wishes to see consolidation down to just a few hundred with attendant economies of scale.

“The Department was using IORP II to drive that change, but this has stalled,” says Cosgrave. “The Department was saying that the higher level of governance envisaged under the directive would apply to all schemes and not just larger ones. In effect, IORP II was going to be used as a regulatory tool to rationalise the number of schemes.”

The legal action being taken by the Association of Pension Trustees of Ireland challenging whether the full weight of regulation should be applied to all schemes may well further delay the Government’s timeline for enacting the enabling legislation and finally publishing the overdue regulatory guidance.

Auto-enrolment concerns

The other area of concern is the proposed auto-enrolment scheme. “The proposals were fairly well thought out in the document,” Cosgrave says. “They got a lot of it right and wisely left some areas open for discussion. However, we were meant to have a clear understanding of the outline of the scheme by now, and we are no further forward.

 “We can look at the Kiwi Saver scheme in New Zealand and the Australian Superannuation Guarantee Fund, as well as the UK scheme, which has resulted in millions of new pensions savers coming into the system,” he says. “But if there isn’t a clear roadmap very soon there will be a delay. It is already open to question whether it can happen by 2022. It was a good start, but the Roadmap will be meaningless unless there is a rapid turnaround now, and people get back on the front foot.”

Master trusts

There has been progress in some areas, however. “The Pensions Authority has come back with a response to the consultation on master trusts. They have outlined their thoughts on the additional governance and capitalisation levels, which may be required for such trusts. However, without the legislation, this doesn’t take us that much further forward,” Cosgrave explained.

New Ireland will launch its own master trust product in the near future, despite this lack of progress. “We can’t wait around indefinitely,” he says. “Master trusts offer many benefits to scheme members in terms of improved governance, better management, economies of scale, and better standards of trusteeship. They will be critical enablers of the consolidation of pension schemes and New Ireland is keen to play a leading role in that.”

A further issue is the regulations surrounding the transfer of schemes into master trusts, which Cosgrave describes as quite onerous and not fit for purpose. “It is not an easy process and needs to be addressed as a matter of urgency,” he adds.

The transformation of financial services

Change is also coming at a consumer level. “We are seeing a massive change in how employers and individuals are engaging with and using financial services,” Cosgrave notes. “Banking is transforming hugely. When was the last time you saw someone write a cheque? People want to engage with their pensions in different ways, and we are working to facilitate that.

With these changes, “the established positions of various players can no longer be taken for granted,” he says. “Professional accountants will, working alongside authorised insurance brokers, have an important role to play helping companies and individuals navigate the new situation.”

 “New Ireland celebrated its 100th anniversary last year, and we have seen many waves of change and disruption over the years,” he adds. “Bank of Ireland, our parent, is older again. The pace of change in financial services is only going to accelerate in the coming years, and we are investing in that transformation to ensure we have the technology and tools which are fit for the 21st century.” 

New Ireland is introducing best-in-class tools, enabling customers to meaningfully engage with their pensions and make changes how and when they want to. These tools are part of New Ireland’s new Group Pensions Platform which will be launched later in the year. “This is very exciting,” says Cosgrave. “We have partnered with UK FinTech company Smart Pension to build the new platform.

“We have been thinking about how the pension world is going to evolve as a result of auto-enrolment, and we are using Smart Pension’s experience in the UK to assist us in the development of a cost-effective platform to allow consumers engage with their pensions.”

New Ireland looks forward to leading the way in meeting member, employer and advisor needs in the changing world of pensions.