It has long been the practice in Ireland for Employers to establish a company pension scheme in order to provide valuable pension and/or life assurance benefits for their employees. Most schemes are set up under trust, which means the scheme is a legal entity in its own right, separate from the Employer, with the assets being held by the Trustees on behalf of the scheme beneficiaries. 

The responsibility for the appointment of Trustees generally rests with the Employer. Historically, on many small to medium sized schemes, it has been the practice for the Employer or directors/management of the employing company to fulfil the Trustee role. With ever increasing obligations on Trustees however, many companies are looking to professional Trustees to fulfill this function on their behalf. There are many good reasons to consider this. The obligations on pension scheme Trustees are considerable and increasing all of the time and for the payment of a relatively modest annual fee this function can be outsourced.

The following are just some of the main benefits of appointing professionals in this area:

Trustee Training

All Trustees are now obliged to undertake training within six months of becoming a Trustee and every two years thereafter. Where a corporate entity is the Trustee such as the employing company, this obligation extends to all directors of the company, even non-resident directors, and it applies regardless of the size of the scheme. Typical initial training can last up to a full day and will cost circa €200 to €500 per attendee. However, the Pensions Authority offer free Trustee training online on the Pensions Authority website. If a professional Trustee is in place as the sole Trustee, Employers will no longer need to allocate time to this or pay the costs of having non professional Trustees trained.

Independence

Trustees have an obligation always to act in the best interest of the beneficiaries of the scheme. Appointing an independent Trustee will reduce the possibility of conflicts of interest which can often arise where, for example, a Trustee is also a company director.

Expertise

A professional Trustee will have wide and in depth expertise which the scheme will have access to. 

Governance and compliance

This area is becoming more onerous with the Pensions Authority recently issuing codes of governance for Defined Contribution schemes. Trustees are responsible for overseeing compliance on a range of matters such as the collection of contributions, issuing of benefit statements and preparation of an annual report to name just a few. The appointment of a professional Trustee means that the time needed to oversee the ongoing running of the scheme is reduced considerably. Also, it is important to note that whilst Trustees may delegate functions such as the administration and fund management to third parties, they cannot delegate responsibility.  

Prosecution and on the spot fines

The Pensions Authority has a list of offences for which it can levy a €2,000 fine. This fine applies per offence and per Trustee. More serious breaches of pension legislations can result in prosecution. A professional Trustee who is sole Trustee will be liable for such fines where they are levied (a separate list of on the spot finds for Employers also exists so this would still apply).

Help in difficult situations

Whilst the day to day running of a pension scheme can be quite routine, from time to time difficult circumstances can arise.  An example would be the death of an employee where the Trustees have to exercise their discretion in deciding who to pay benefits to, or where a scheme has to be wound up. Having the experience of a professional Trustee readily available can be invaluable in these situations.

Many Employers want to retain some oversight on their scheme by having representatives as Trustees and indeed members are entitled to representation on a Trustee board in certain circumstances. In such circumstances an Employer can appoint a professional Trustee in addition to retaining other non-professional Trustees and still get many of the benefits outlined above.

An Employer can change the Trustees on the company pension scheme by means of a short deed so it is not a costly or an onerous process.

If you are interested and would like more information please contact your Pension Consultant or your Irish Life Account Manager.