Ireland implemented Directive 2003/41/EC of the European Parliament and of the Council on the Activities and Supervision of Institutions for Occupational Retirement Provision (the Pensions Directive, known as the IORPs Directive) with effect from 23 September 2005. The Pensions Directive was implemented in Ireland by amending the Pensions Act 1990 and introducing Regulations governing specific issues such as trusteeship, investments, funding standard, preservation of benefits and cross border schemes.

These combined provisions provide the statutory framework for the regulation and supervision of cross-border schemes in Ireland.

The Pensions Directive set a common minimum level of supervision across EU member states, enabled Irish pension schemes to operate on an EU cross-border basis and permitted employees in Ireland to participate in overseas EU pension schemes.

Ireland was ahead of most other EU member states in implementing the requirements of the Pensions Directive in an effort to make Ireland the logical choice for multinational employers seeking international pension solutions. Prior to the enactment of the Pensions Directive, Irish pensions law was broadly compliant with the Pensions Directive's requirements. Accordingly, the Pensions Act 1990 did not require substantial amendment to bring it into line with the Pensions Directive.

The approach adopted by Ireland was both flexible and pragmatic and as a result the compliance regime for pension schemes is not unduly onerous. In light of Ireland's approach to the Pensions Directive and the attractive tax treatment of cross-border schemes, Ireland is an excellent home for cross-border schemes.

The requirements for setting up a cross border scheme in Ireland include obtaining authorisation from the Pensions Board and approval from the Pensions Board to accept contributions. Advantageous tax benefits apply to Irish cross-border schemes and Irish members of overseas IORPs. Approval from the Irish Revenue is required to operate the Irish element of an overseas IORP.

Irish schemes seeking authorisation to engage in cross-border activity will be required to demonstrate compliance with the Funding Standard under Part IV of the Pensions Act. Following authorisation, Irish schemes engaging in cross-border activity will be subject to the same funding requirements as (Irish) schemes conducting only domestic business.

These funding requirements are intended to implement the requirement of the Pensions Directive that cross-border schemes be fully funded at all times.

Under the Funding Standard provisions of the Pensions Act, defined benefit schemes (excluding certain schemes primarily in the public sector) are required to prepare and submit to the Pensions Board actuarial funding certificates at 3 yearly intervals. The purpose of the actuarial funding certificate is to enable the scheme actuary to certify whether or not, if the scheme had wound up at the effective date of the certificate, its assets would have been sufficient to meet its liabilities. A certificate must be submitted to the Pensions Board no later than nine months after its effective date. If the scheme could not have met its liabilities a funding proposal must be submitted to the Board.

Trustees have specific duties regarding the proper investment of scheme resources. Furthermore, pension scheme trustees (other than schemes with less than 100 members) must prepare and maintain a Statement of Investment Policy Principles
(an SIPP). An SIPP is a written statement describing the basis on which the trustees choose investments (i.e. their investment policies) and its contents must cover certain specified matters at a minimum. The SIPP requirements do not impose any specific investment practices on pension schemes. An SIPP must be updated if the investment policies are amended it must be reviewed every three years.

Trustees must be qualified to act as trustees of a scheme and certain persons are excluded from acting a trustee including undischarged bankrupts. If a scheme has not appointed an investment manager, the trustees must demonstrate to the Pensions Board that they possess among their membership the appropriate qualifications and experience to assess and advise on investment options and execute the investment decisions in relation to the scheme's resources.

During 2008 the Pensions Board received five new applications for cross border authorisation and approval to accept contributions from the trustees of Irish pension schemes, which brings the total number of such applications received to 27. The applications granted related to cross border activities in the UK, Hungary, Poland and the Netherlands. Furthermore, the Pensions Board was notified by the UK Pensions Regulator of 17 UK schemes with Irish members to whom it granted authorisation and approve and to engage in cross-border activity in 2008.

It remains to be seen whether such numbers will increase but Ireland remains an attractive location for establishing international pensions arrangements.

September 2009.

For further information please contact Gillian Dully.