This Spring update from our Pensions Group covers topical issues in pensions law including the latest news on DORA transposition and automatic enrolment, legislative updates, Pensions Authority updates, and a summary of interesting recent ESG developments.
Digital Operational Resilience Act ("DORA")
As trustees will be aware, DORA is an EU regulation primarily focused on strengthening ICT security for large financial institutions but which also includes pension schemes within its scope. Responsibility for pension schemes' compliance with DORA lies with scheme trustees. The implementation date for DORA was 17 January 2025 and trustees should be working towards compliance, including in respect of the key points summarised below.
On 28 November 2024, the Pensions Authority (the "Authority") published a set of Questions & Answers (PDF, 134 KB) on DORA for pension scheme trustees (the "DORA Q&As") which were subsequently updated in January and March 2025. The DORA Q&As, together with recent publications from the European Supervisory Authorities ("ESAs"), provide some clarification in the following areas:
a. Identification of ICT third party service providers
A key outstanding question for trustees is which of their
third-party service providers constitute "ICT third-party
service providers" under DORA, such that enhanced scrutiny of
such providers and additional contractual terms are required in
respect of them. On 22 January 2025, the European Commission issued a clarification on
the definition of "ICT Services" under DORA. The
Commission stated that ICT Services should be interpreted broadly
to "encompass digital and data services provided through
ICT systems on an ongoing basis". However, the Commission
made an exception for services provided by a financial entity that
are predominantly regulated financial services but which include an
ICT component; such services should not be considered ICT Services
and thus fall outside the scope of DORA (the "Financial
Services Exception").
On 12 March 2025, the Authority published a decision tree (PDF, 84.0
kb) to help scheme trustees determine whether the Financial
Services Exception would apply to any of their service
providers.
b. Submission of registers of information
Under article 28 of DORA, financial entities are required to maintain a register of their ICT service providers and the contractual arrangements they have in place with them. The DORA Q&As confirm that pension schemes with 16 or more active or deferred members must submit registers of information to the Authority for onward submission to the ESAs.
The reference date for the first register of information is 31 March 2025. Registers of information are to be submitted to the Authority through a secure online link to be provided to schemes by the Authority. The Authority has confirmed that schemes which did not receive such a link by 14 March 2025 will not be expected to submit their register of information for the time being, but that such schemes should still prepare their register of information and be prepared to submit it to the Authority on request.
c. Legal Entity Identifiers
In order for pension scheme trustees to submit the register of information for their scheme, the scheme must have a Legal Entity Identifier ("LEI"). Arthur Cox, through its in-house Listings Group, can liaise with LEI providers to obtain a LEI for your scheme. If you require an LEI and would like Arthur Cox's assistance, please reach out to a member of the Arthur Cox Pensions and Employee Benefits team.
d. Reporting of major ICT-related incidents
Under article 19 of DORA, financial entities are required to report "major ICT-related incidents" that would have a high adverse impact on their critical functions. The DORA Q&As confirm that pension scheme trustees should report any major ICT-related incidents to the Authority in the first instance. Trustees may outsource the performance of the notification obligation to a third-party service provider, but must notify the Authority where they put such an arrangement in place.
On 17 January 2025, the Authority published template documents and guidance to be used by trustees when notifying the Authority of major ICT-related incidents. The guidance requires that trustees provide an initial report of a major ICT-related incident to the Authority within 24 hours of first becoming aware of the incident and that this is followed-up by an intermediate report within 72 hours of the initial report and a final report within one month of the intermediate report.
Automatic Enrolment
The government has indicated that the commencement of the new automatic enrolment retirement savings system ("AE") is likely to be delayed beyond the intended 30 September 2025 implementation date, but that it is "likely to still occur in the short number of months after September". Minister for Public Expenditure, NDP Delivery and Reform, Jack Chambers, stated that a deferral of the commencement date was under review as a consequence of a number of factors including the "enormous scale of administrative work" involved in preparing for AE. Minister Chambers noted that Minister for Social Protection, Dara Calleary, is due to bring an update to government on the specific timing of AE in the coming weeks.
Notwithstanding the likely delay in the commencement of AE by a number of months, employers and trustees should continue to familiarise themselves with the new requirements and take steps to ensure compliance. Where employers wish to solely use their existing pension arrangements to meet the requirements of AE rather than operating a dual system (i.e. continuing their existing pension arrangements alongside the AE system), it is likely that amendments will be required to scheme documentation and potentially contracts of employment. Such scheme amendments may include removing waiting periods from scheme eligibility provisions and restricting the circumstances in which members can opt-out. Where trustee consent to amendments is required under scheme governing documentation, the trustees should carefully consider any amendments proposed prior to giving their consent.
To receive further updates on the introduction of AE in Ireland, subscribe to the Arthur Cox Pension Auto-Enrolment portal.
Legislative Updates
Publication of Employment (Contractual Retirement Ages) Bill 2025
On 1 April 2025, the Government published the Employment (Contractual Retirement Ages) Bill 2025. The Bill would allow, but not compel, employees to stay in employment until the State Pension Age (currently age 66). Our Employment Group recently published a summary of the main provisions of the Bill.
We would note that where pension schemes have a "Normal Retirement Age" that is less than age 66, the Bill (if enacted) would not require such schemes to amend their Normal Retirement Age. However, some employers are considering amending scheme rules where required to facilitate longer working. If no scheme changes are proposed, trustees of such schemes may wish to review the late retirement provisions of their scheme to consider how these would apply in the event that an employee exercises the right to remain in employment up to State Pension Age.
Financial Services and Pensions Ombudsman (Amendment) Bill 2023
On 5 March 2025, the Financial Services and Pensions Ombudsman (Amendment) Bill 2023 (the "FSPO Bill") was passed by the Dáil and was in its final stages in the Seanad as this Update went to press. The main purpose of the FSPO Bill is to amend the legislation underpinning the proceedings of the Financial Services and Pensions Ombudsman in light of the decision of the Supreme Court in the Zalewski case. Further detail on the FSPO Bill can be found in our Pensions Update: Spring 2024.
Occupational Pension Schemes (Revaluation) Regulations 2025
The Minister for Social Protection has signed the Revaluation Regulations in respect of the Revaluation Year 2024 and has prescribed an increase of 2.1 % in the amount of preserved benefits. Administrators will need to update the records of deferred members with entitlements to preserved benefits to take the revaluation into account.
Pensions Authority Updates
Authority publishes findings report on 2024 supervisory activities
On 3 April 2025, the Authority published a report on the issues
identified in the course of its supervisory activities in 2024
(PDF, 197 KB). The Authority's activities included
supervisory reviews of Master Trusts, defined benefit
("DB") schemes and defined contribution ("DC")
schemes; ongoing engagement with all Master Trusts and larger DB
and DC schemes; compliance audits of DB, DC schemes and Master
Trust providers; and inspections of trustees and registered
administrators.
Among the most significant issues identified by the Authority were
the following:
- Governance: where trustees are required to have policies in place under the Authority's Code of Practice (the "Code"), the Authority expects trustees to tailor such policies to the specifics of their scheme and not simply copy wording from the Code. Trustees should also maintain records of when such policies are reviewed and revised. The Authority also emphasised the importance of trustees preparing comprehensive minutes of their meetings.
- Operations: the Authority expects trustees' contracts with administrators to contain clear recourse for trustees in the event that service levels fall below agreed standards, and that where administrators seek to impose limits on their liability under the contract trustees should carefully consider if such limits are appropriate for their scheme. Trustees should also be prepared to take meaningful action where administrators breach the terms of their administration contracts or the service levels therein.
- Risk Management: The Authority reviewed the own-risk assessments ("ORAs") conducted by trustees and commented that not all ORAs were sufficiently comprehensive. The Authority expects that ORAs should include assessments of: external events outside the control of trustees; outsourcing risks; and scheme viability and sustainability. Trustees should also set out appropriate actions to address the risks identified.
- Member Communications: the Authority noted that where advisers or brokers issue communications to scheme members, trustees should retain clear oversight of such communications. Trustees should also ensure that member complaints are processed in a timely manner.
- Investment: The Authority expects schemes to have investment objectives that are clearly identifiable and measurable and to monitor progress against these objectives at trustee meetings. Trustees should also ensure they have considered whether their default investment strategy is appropriate for members and adequately documented this assessment.
The above list of issues is not exhaustive. Trustees and administrators should consider the report's findings in full and seek to address the issues identified if they consider them to be relevant to their scheme.
Pensions Regulator outlines Authority's future plans
In an address to the Irish Association of Pensions Funds' Spring Conference on 13 March 2025, the Pensions Regulator outlined the Authority's plans for 2025 and beyond.
In 2025, the Authority intends to undertake supervisory reviews of three times as many schemes as it did in 2024. The Authority will also conduct a review of the Code later in 2025, with value for money benchmarks and investment objectives likely to be two areas of focus. The Authority is also in the process of replacing its supervisory IT platform, with a view to the new system going live in 2026.
The Pensions Regulator also noted that future areas of focus for the Authority may include the development of a scheme authorisation regime; proposals for in-scheme drawdown; mechanisms for DB scheme consolidation; more effective data gathering from schemes; and the provision of clear value for money benchmarks for schemes.
IORP II and One Member Arrangements
Expiry of IORP II derogation for OMAs established prior to 22 April 2021
Under the transitional arrangements for the introduction of IORP II in 2021, one-member arrangements ("OMAs") which were established prior to 22 April 2021 were granted a five-year derogation from the requirement to comply with the provisions of IORP II and the Code. This derogation will expire on 21 April 2026 and we anticipate that providers of OMAs will shortly be reaching out to members, if they have not already done so, to discuss future options in respect of their OMAs. These options are likely to include transferring the OMA to a master trust, personal retirement savings account ("PRSA") or personal retirement bond.
PRSAs
Authority publishes revised PRSA Code of Conduct
Under the Pensions Act, the Authority is required to prepare and from time to time amend a code of conduct in relation to the producing, marketing and selling of PRSA products by PRSA providers (the "PRSA Code"). It is a condition of the approval of PRSA products by the Authority that the product and PRSA provider are compliant with the PRSA Code.
On 31 January 2025, the Authority published a revised PRSA Code. In all material respects, the Code is unchanged from the draft that was published by the Authority in September 2024 and which was summarised in our Pensions Update: Winter 2024.
The revised PRSA Code will apply with effect from 1 August 2025.
Environmental, Social and Governance ("ESG")
Two recent developments, in the USA and UK respectively, have provided interesting insights into the challenges faced by trustees with regard to the incorporation of ESG factors into their investment decision-making processes.
US federal judge finds that American Airlines breached duties to scheme members by incorporating ESG factors into investment decision-making
On 10 January 2025, a federal judge in Texas found that American Airlines was in breach of its duties towards pension scheme members under the Employee Retirement Income Security Act (ERISA) by incorporating ESG factors into the investment criteria for its employee pension plan. The case was brought as a class action lawsuit by an American Airlines pilot on behalf of more than 100,000 participants in the scheme. The judge held that investment decisions should be made solely on the basis of the financial interests of members and that by incorporating non-financial factors into the process American Airlines was acting in breach of its duty of loyalty to scheme members.
Publication of Counsel's Opinion summarising present state of the law on incorporation of non-financial factors in investment decision-making in England and Wales
On 15 January 2025, the Scheme Advisory Board for the Local Government Pension Scheme ("LGPS") published a counsel's opinion from Nigel Giffen KC on the extent to which the LGPS administering authorities, which act in a fiduciary capacity and are responsible for investing LGPS assets on behalf of LGPS members, could take into account non-financial factors (including ESG factors) in their investment decision-making process. Nigel Giffen KC had previously provided an Opinion to the Scheme Advisory Board in 2014 which had proved influential in the development of the law in this area in the UK.
Counsel noted that the law had not substantially changed in this area since his 2014 Opinion, but that the position had become "more certain" as a result of a UK Supreme Court ruling in R (Palestine Solidarity Campaign Ltd) v Secretary of State for Housing, Communities and Local Government in 2020 which held that administering authorities could take non-financial factors into account where: (i) doing so would not involve significant risk of financial detriment to the scheme (the "Financial Criterion"); and (ii) the authority has good reason to think that scheme members would support their decision (the "Member Support Criterion"). Counsel concluded that ESG factors can be taken into account where both the Financial Criterion and the Member Support Criterion are satisfied.
While neither of these developments would constitute a binding authority on Irish courts, they are nonetheless instructive in showing the differing views on this topic that have been taken across different jurisdictions and the delicate balancing act that must be undertaken by trustees where they seek to adopt ESG criteria in their investment decision-making.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
