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Creating Your Success Through Financial Planning

A Guide to Group Pensions and Group Risk Benefits for Financial Brokers

Financial Planning & Guidance


Creating your success through Financial Planning

One – Unified Voice

A Guide for Financial Brokers

June 2014Version 1.1



A Guide to Group Pensions and Group Risk Benefitsfor Financial Brokers

A guide for Financial Brokers

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Contents

1 Employer Obligations

1.1 PRSA Facility

1.2 Company Pension Scheme

2 The State Pension

2.1 Social Protection Benefits

2.2 PRSI Contribution Rates

2.3 State Pension Age

2.4 Social Insurance Benefits – at a glance

3 Company Pensions and the State Pension

3.1 Pension Integration

4 Legal Aspects

4.1 Why have a Trust?

4.2 Establishing the Trust

4.3 Completing the Deed

4.4 Other Employers

4.5 Sole Trader/Partnership

4.6 Scheme Rules

4.7 Policy Documents

4.8 Other Documentation

5 Types of Scheme

5.1 Trust Based Scheme or PRSA?

5.2 Company Scheme – Insured or Self Administered?

6 Scheme Design

6.1 Normal Retirement Age

6.2 Early Retirement

6.3 Late Retirement

6.4 Eligibility Conditions – General

6.5 Eligibility Conditions – Risk

6.6 Eligibility Conditions – Pension Benefits

6.7 Contribution Rates

6.8 Minimum Employer Contribution

6.9 Typical Contribution Rates

6.10 Additional Voluntary Contributions

6.11 Equal Treatment

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6.12 Benefits on Leaving Service

6.13 Investment of Contributions

6.14 Risk Benefits

7 Additional Voluntary Contributions

7.1 Treatment of AVCs

7.2 AVC Drawdown

7.3 ARF Option at Retirement

7.4 Death in Service

7.5 PRSA Transfers

7.6 Investment of AVCs

7.7 AVC PRSA

8 Investment of Contributions

8.1 Default Investment Strategy

8.2 Suitable Range of Funds

8.3 Member Communication

8.4 Online Information

9 Benefits at Retirement

9.1 Taxation of Retirement Lump Sums

10 Trustee Training

10.1 Training Courses

10.2 Individual Pension Arrangements

11 Scheme Management

11.1 Renewal Date

11.2 Inclusion of new entrants

11.3 Waiver Form

11.4 Meeting New Members

11.5 Risk Benefits

11.6 Civil Partners

11.7 Registered Administrator/Renewal Deadlines

11.8 Annual Benefit Statements

11.9 AVC Promotion

11.10 Tiered Contribution Rates

11.11 Leaving Service

11.12 Retirement

11.13 Additional Voluntary Contributions

12 New Business

12.1 New Scheme

12.2 Pricing

12.3 Selecting an insurance company

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12.4 Taking over existing schemes

13 Complaints

13.1 Internal Dispute Resolution (IDR)

13.2 IDR Procedures

13.3 IDR findings – options for complainant

13.4 Pensions Ombudsman

14 Family Law and Pension Adjustment Order (PAOs)

14.1 Pension Adjustment Order (PAO)

14.2 Implementation of a PAO

14.3 Types of PAO

15 Group Risk

15.1 Legal Aspects

15.2 Arranging the Cover

15.3 Advantages of Group Risk

15.4 Meeting the Cost

15.5 Factors that influence premium rates

15.6 Non Medical Limit

15.7 Underwriting of benefits

15.8 Types of Underwriting

15.9 Underwriting Terms

15.10 Multi National Pooling

15.11 Group Risk Quotations

15.12 Voluntary Group Risk

16 Group Life Assurance

16.1 Type of Benefits

16.2 Payment of benefits

16.3 Letter of Wishes

16.4 Pension Adjustment Order (PAO)

17 Disability Cover

17.1 Type of Benefits

17.2 Deferred Period

17.3 Escalation

17.4 Disability Claims

17.5 Payment of Benefits

17.6 Claims Support

18 Pension Legislation

18.1 The Pensions Act 1990

18.2 Taxes Consolidation Act 1997

18.3 Family Law Acts

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18.4 Civil Partnership Legislation

18.5 Personal Insolvency Act 2012

19 Pension Regulatory Bodies

19.1 The Pensions Authority

19.2 Pensions Ombudsman

19.3 Revenue Commissioners

19.2 Financial Services Ombudsman

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James Skehan FIIPM, ACII is the Head of Pensions in New Ireland and a Director of General Investment Trust.

James has over 30 years experience in the pensions industry, particularly in the area of Group Pensions.

Prior to joining New Ireland in 2001, James worked in the broker market for over 20 years.

James has had numerous pension articles published in the national and trade press, and is a regular presenter

at industry conferences and meetings.

Aboutthe Author

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The area of group pensions is an important and growing segment, not just of the pension industry, but of the overall insurance industry in Ireland. It is a key market that Financial Brokers should be involved in for a number of reasons, including:

- The income that is generated by the group pension business itself.

- The platform that group schemes provide a Financial Broker for developing scheme members as personal clients.

The market has changed over the years against a background of increasing regulation, significant problems with the financial stability of Defined Benefit schemes and the growth of Defined Contribution schemes, both trust based company pension schemes and PRSAs. Many Defined Benefit schemes are in some form of financial deficit and it is expected that the number of Defined Benefit schemes will reduce significantly in the coming years. The Defined Contribution model has grown in popularity, particularly over the last 20 years, and is now the preferred approach for providing pension benefits for employees. Within the Defined Contribution world, employers have the option of using a trust based company pension scheme or a PRSA.

Advice is at the heart of any group pension scheme and Financial Brokers have a key role to play in working with employers to design a scheme to best suit their particular circumstances, and in reviewing existing schemes to ensure that they remain fit for purpose.

Traditionally the group pension market was seen as accessible only for the larger pension consultancies, and some Financial Brokers are still reluctant to become involved in group pensions as they feel it is an area in which they are not sufficiently expert.

The switch from Defined Benefit to Defined Contribution has changed the nature of group pensions and whilst employers and trustees still require a service from Financial Brokers, there is now a greater focus on the scheme member. This change in emphasis has underlined the need for a fresh approach to the servicing of group pension schemes and means that Financial Brokers are ideally positioned to prosper in this market.

The following table gives a breakdown of the group pensions market in Ireland and highlights the significant number of small to medium sized schemes (less than 50 members) that are in place, with very few schemes having more than 100 members. As the majority of the schemes have less than 50 members, all Financial Brokers will have the capacity to secure and service group pension schemes.

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DC Schemes at 31st December 2012 (Source: Pensions Authority, excludes one member schemes)

Scheme Size Number of Schemes Number of Members

1 – 50 12, 051 63, 368

51 – 99 320 21, 943

100 – 500 251 48, 803

501 – 1,000 26 17, 672

1,000 + 19 33, 628

Total 12, 667 185, 414

The objective of this guide is to assist and support Financial Brokers who wish to operate in the group pension market, with an emphasis on the practical aspects of how the group pension market works and how a Financial Broker can develop this area of their business as a significant source of income.

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Before 2002 there were no obligations on employers in relation to pension provision. The Pensions (Amendment) Act 2002 imposed certain minimum obligations on employers in relation to pension provision for theiremployees. In simple terms, under the legislation an employer must provide access for their employees to at least one standard PRSA where:

- It does not operate a company pension scheme.

- It operates a pension scheme but employees must be working with the employer for more than six months before they are eligible to join the scheme.

- The scheme only provides death in service benefits.

If a company pension scheme doesn’t provide an AVC facility then an AVC PRSA facility needs to be provided.

1.1 PRSA Facility Employees covered by the legislation are known as ‘excluded employees’. Employers must provide access for excluded employees to a standard PRSA facility; and in particular an employer must:

- Enter into a contract with a PRSA provider. This involves the completion of a Section 121 contract.

- Notify employees of their right to contribute to a PRSA.

- Allow excluded employees reasonable access to Financial Brokers at work so that they can set up a standard PRSA.

- Allow reasonable paid leave from work for employees to set up a PRSA. - Deduct contributions made by employees under the net pay arrangement and apply tax relief at source.

- Remit PRSA contributions to the PRSA provider within 21 days of the end of the month that the deductions were made.

- Confirm that the PRSA contributions in the previous month have been remitted – this is generally done through an employee’s payslip.

- Ensure that maximum contributions for tax relief purposes are not exceeded – based on age and salary.

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1.2 Company Pension Scheme* If an employer operates a company pension scheme that allows all employees to join during the first six months of service then a PRSA facility does not have to be set up. Although the only legal obligation on an employer in relation to pension provision in Ireland is to provide access to a standard PRSA facility, if an employer decides to establish a company pension scheme, then a number of obligations must be met to ensure compliance with legislation and regulations. These obligations are dealt with in other sections of this guide but include: - Ensuring that the pension scheme adheres to the principles of equal treatment.

- The timely deduction and remittance of pension contributions.

- Ensuring that the trustees of the company pension scheme undertake training every two years.

* For ease of reference, occupational pension schemes are referred to in this booklet as company pension schemes, to differentiate them from PRSA schemes. Of course, company pension schemes can be set up by any employer for their employees, not just by companies. For example, partnerships, sole traders and charitable bodies can establish a company pension scheme for their employees.

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Social protection pensions (also called State Pensions) are considered to be the ‘first pillar’ of pension provisionin Ireland, with the aim of ensuring a basic level of income in retirement for all individuals. Social protectionbenefits have traditionally been funded on a pay as you go basis, with benefits being paid out from current Pay Related Social Insurance (PRSI) contributions.

2.1 Social Protection Benefits There are two types of old age State Pensions:

(1) State Pension (Contributory) provides a pension on meeting certain conditions in relation to PRSI contributions paid. This pension is not means tested – although the increased amount payable in respect of an adult dependant is means tested.

(2) State Pension (Non-Contributory) is a means-tested payment for people aged 66 or over who do not qualify for the State Pension (Contributory) based on their social insurance record. Employees in a company pension scheme will claim the State Pension (Contributory) based on PRSI contributions they have paid.

2.2 PRSI Contribution Rates Most private sector employees are categorised as Class A for PRSI rates and pay a contribution of 4% of all earnings (employees earning less than €352 per week are exempt from PRSI). Company directors remunerated through the PAYE system (Schedule E) can either be a Class A contributor or a Class S contributor (self employed rate). Whilst there is no hard and fast rule to determine which class a director should be included in, in general where a director is a major shareholder and can decide what work he will do and how it will be done he will be treated as a self employed contributor – Class S. If a director holds less than 50% of the voting share in a company their individual circumstances must be examined to determine whether or not a contract of service exists. If such a contract exists then the director is normally insured as an employee under Class A.

Disability CoverThe State Pension

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The main PRSI contribution rates for 2014 are as follows:

PRSI Employee Rates Employer Rates

Class A *4% of all income 10.75% of all earnings

Class S 4% of all income Nil

* Employees earning less than €352 per week are exempt from PRSI.

2.3 State Pension Age From 1/1/2014 there will only be one State Pension age – 66. Up until then an individual could receive the State Pension (Transition) at age 65 provided they had retired from employment. If a person continued working they would receive the State Pension (Contributory) from age 66. From 1/1/2021 the State Pension age will increase from 66 to 67, and to age 68 from 1/1/2028.

2.4 Social Insurance Benefits – at a glance The table below summarises the entitlement to Social Insurance Benefits:

Benefit Class A(Employees)

Class S(Self employed and Company Directors)

State Pension (Contributory) Yes Yes

Widow(er)s and surviving Civil Partners Contributory Pension

Yes Yes

Invalidity Pension Yes No

Illness Benefit Yes No

Jobseeker Benefit Yes No

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Employers, in establishing company pension schemes for their employees, do so with a view to augmenting or topping up the benefits payable from the State. In the past, when Defined Benefit pension schemes were more the norm, many schemes formally ‘integrated’ their pension scheme with the pension available from the State.

3.1 Pension Integration A Defined Benefit pension scheme would integrate with the State Pension by assuming that a certain

portion of each employee’s salary would be ‘pensioned’ by the State. As a result, the company pension scheme aimed to provide a pension (usually based on a person’s length of service with the company) based on the balance of the employee’s salary, often referred to as the pensionable salary. A Defined Benefit pension scheme in many cases would calculate pensionable salary as an individual’s basic annual salary less 1.5 times the State Pension payable to a single person. In monetary terms this meant a deduction from salary of €17,963 (€230.30 per week – 2014 rate × 52 × 1.5). The assumption made was that the pension, of €11,976 per annum, that an individual would receive from the State equated to a pension of two-thirds of the first €17,963 of their annual salary. The company pension scheme would then provide a pension benefit on the balance of the employee’s salary i.e. excluding the first €17,963. For example, if an individual was in receipt of a salary of €50,000 per annum, with 40 years’ service at retirement; and the scheme provided a pension of 1/60 th of pensionable salary for each year of service, then:

Basic Annual Salary €50,000Less State Offset €17,963Pensionable salary €32,037

Pension from Company Scheme 40 / 60 × €32,037 €21,358Add State Pension (40 / 60 × €17,963) €11,975

Total combined pension €33,333

(€33,333 = 40 / 60 of €50,000)

Defined Contribution Schemes Very few Defined Contribution schemes integrate with the State Pension in such a formal fashion. While

an individual will receive benefits from both the State and the company pension scheme, the link is not as structured as it is with Defined Benefit pension schemes.

Company Pensions and the State Pension

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With the exception of public sector schemes, company pension schemes in Ireland are established under trust. For single member executive schemes a letter of exchange is generally used, with the employer usually acting as trustee. This is signed by the employer / trustee and the individual member.

In the case of a group scheme, a trust deed is executed.

Both methods legally establish the trust. On a practical basis, the completion of a trust deed is slightly more complicated in that the deed needs the company seal of the employer to be affixed to the document and typically requires two signatures: either two directors of the company or a director and the company secretary. The deed is also signed and sealed by the trustees.

4.1 Why have a Trust? There are two main reasons why a company pension scheme is established under trust: (1) It is a requirement for full (also called exempt) Revenue approval that a company pension scheme is established under trust. Exempt approval means that the scheme can avail of all the tax advantages applicable subject to certain limits, i.e.:

- Tax relief on employer contributions

- Tax relief on employee contributions

- No BIK for employees in respect of the employer contribution

- Tax free growth on the pension assets (apart from the temporary government levy)

(2) The second reason why a trust is used is to safeguard the pension fund of the scheme members until they can draw benefits from the pension scheme. Having the assets under the trust structure keeps the assets ring-fenced from those of the employer.

4.2 Establishing the TrustThe trust deed is established by the employer and will typically.

- Establish the scheme - Confirm the commencement date

- Name the scheme

Legal Aspects

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- Appoint the initial trustees - Adopt the scheme rules

For most insured contracts, the trust deed will be fairly brief, with most of the detail being contained in the scheme rules. In addition to the points above, the trust deed will: - Give power to the employer to replace existing trustees and appoint new ones - Allow for the wind up of the pension scheme.

4.3 Completing the DeedWhen completing the trust deed the following information needs to be included:

- The date that the deed is signed and sealed

- The registered address of the employer and the trustee

- The name of the scheme

- The commencement date of the scheme

The following signatures / seals will be required:

(1) Employer. The trust deed is signed by either two directors of the company or a director and the company secretary and the company seal is affixed.

(2) Trustees. In the case of a corporate trustee, the registered address will be needed. Two directors or a director and secretary of the corporate trustee will countersign the deed and the company seal of the corporate trustee will be affixed. Where individual trustees are being appointed, a note of their home address will be needed and included in the deed. They will each sign the trust deed and have their signatures witnessed.

4.4 Other Employers Although most company pension schemes are established by employers who are limited companies, it is possible to establish a company pension scheme for other types of employers. The key requirement in establishing a company pension scheme is that the members to be included are employees paying income tax under Schedule E.

4.5 Sole Trader/Partnership A sole trader, i.e. a self employed business person can establish a company pension scheme for his / her employees. In a similar fashion, it is possible for a partnership to establish a company pension scheme for employees. In the case of either a sole trader or a partnership, there is no separate legal entity as there is in the case of a limited company. In these cases a special deed needs to be drawn up as there will be no company seal that can be affixed. Individual trustees or a corporate trustee need to be appointed.

4.6 Scheme RulesOne of the key clauses in executing a trust deed is the adoption of scheme rules. For insured contracts, most companies will use a generic set of scheme rules and these will cover topics including:

- Definitions

- Membership

- Appointment, removal and retirement of trustees

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- Contributions

- Investment

- Trustees

- Benefits on leaving service, retirement and/or death

- Limits on taxation of benefits

- Transfers

- Takeover of scheme by new employer

- Discontinuation of contributions

- Winding up of the scheme

- Pension Adjustment Orders

- Arbitration and proceedings

- Revenue Commissioners approval

- Associated employers

4.7 Policy Documents For an insured contract, the insurance company will issue policy documents for the pension, life and / or

disability scheme.

4.8 Other Documentation Once a pension scheme is established, there may be changes made to the scheme over the years that need to be reflected in the documentation.

Examples of changes would include:

(1) Deed of Adherence A deed of adherence will allow employees of any associated company to be included in the company pension scheme. The deed of adherence would need to be signed and sealed by the principal employer, the associated employer and the trustees. A deed of adherence may also be completed when a scheme is being established where an associate company is to be included at the outset. (2) Deed of AmendmentA deed of amendment is typically used when there are changes to the scheme benefit structure and / or the terms and conditions of the scheme.

(3) Deed of Appointment and RemovalA deed of appointment and removal is used where there are changes in the trustees of the scheme.

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Subject to Revenue regulations, it is possible for an employer, with the advice of their Financial Broker, to design a scheme to suit their particular set of circumstances and employees. In this section we look at whether to opt for a trust based scheme or a PRSA; and the various types of company schemes.

5.1 Trust Based Scheme or PRSA? An employer who wishes to provide pension benefits for their employees can do so through a trust based company pension scheme or a PRSA. Whilst the company pension scheme can operate on either a Defined Benefit or Defined Contribution basis, in reality Defined Benefit pension schemes are rarely if ever used by an employer setting up a new scheme for employees.

In considering the relative merits of a company pension scheme and a PRSA, there are a number of features attaching to each that should be considered. A summary of the main points is set out below.

A. A Defined Contribution pension scheme must be established under trust with trustees appointed. A PRSA on the other hand is a policy that is legally owned by each employee and therefore there is no need for a trust to be established. This is seen as one of the major advantages of a PRSA, in that it is a simpler contract for the employer.

B. The maximum contributions that can be paid into a PRSA are more restrictive than under a trust based scheme. For both types of schemes, the maximum personal contributions are set out in the table below and are limited to a maximum salary of €115,000.

Age Percentage of Salary

Up to 30 15%

Age 30 – 39 20%

Age 40 – 49 25%

Age 50 – 54 30%

Age 55 – 59 35%

Age 60 and over 40%

The significant difference is that under a PRSA, the above maximum contribution levels include any contribution paid by the employer, whereas in a company pension scheme:

Types of Scheme

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C. An employer contribution can be paid in addition to the above percentages

D. The salary limit of €115,000 does not apply to employer contributions, although under a company pension scheme you cannot fund for a pension in excess of two-thirds of salary (with attaching spouse’s pension / escalation). In all cases there is a maximum fund threshold, which from the 1st of January 2014 is €2m.

E. Contributions paid into a PRSA by the employer become the property of the employee from the outset. In the case of a company pension scheme, ownership by the employee of company contributions applies only when an individual has been a member of the pension scheme for two years, or has transferred in a preserved benefit from a previous pension scheme.

F. With a company pension scheme there is no BIK payable by the member on the employer contribution. With a PRSA, the employee must pay the USC levy of 7% on any contribution paid into the PRSA by the employer.

G. With a company pension scheme, it is necessary to select a normal retirement age of between 60 and 70, although once this has been selected, early and late retirement between the ages of 50 and 70 are allowed (subject to certain conditions being met). With a PRSA, there is no set normal retirement age and benefits can be drawn down at any stage between 60 and 75. Benefits can also be drawn from age 50 if it is an employee PRSA and the employee has retired from the employment to which the PRSA relates.

H. At retirement, there is greater flexibility with a company pension scheme compared to a PRSA. With a PRSA up to 25% of the fund can be taken as a retirement lump sum and with the balance the individual can purchase a pension or invest in an ARF (subject to restrictions). The facility to take a retirement lump sum of 25% of the fund and to avail of the ARF-type options with the balance is equally available to a member of a company pension scheme. In addition they also have the option to take a retirement lump sum based on their salary and service with the employer up to a maximum of 1.5 times final salary, with the balance of the employer/employee fund being used to purchase a pension. In this situation, the ARF option will only apply to any funds that have been built up by additional voluntary contributions.

I. With a company pension scheme, it is for the trustees in conjunction with their Financial Broker to decide whether to offer investment choice to members and, if choice is offered, to decide on the funds available and what the default fund should be. With a PRSA, investment choice comes as part of the contract. A choice of funds, as well as a default investment strategy selected by the PRSA provider, is available to the individual at the time of establishing the contract.

J. Protection benefits, if required, can be included as part of a company pension scheme. A PRSA is a pension only contract and any protection benefits would need to be set up on a stand-alone basis. This would bring the complexity of setting the plan (for death benefits) up under trust back into consideration.

SummaryA PRSA is a simpler contract but, particularly from an employee’s perspective, the general consensus is that a trust based company pension scheme is the preferred option for providing pension benefits.

Although a company pension scheme has to be established under trust, the following are the two key reasons why it is the preferred option when benefits are being provided for employees:

- Employees do not have to pay the USC levy on employer contributions to a company pension scheme.

- At retirement there is greater flexibility in terms of the benefits that can be taken. In most cases, the retirement lump sum from a company pension scheme will be higher under the salary and service rule than taking 25% of the fund, which is the only option available under a PRSA.

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5.2 Company Scheme – Insured or Self Administered There are a number of ways that a company pension scheme can be established.

(1) Insured SchemeMost small to medium sized company pension schemes are established using a ‘bundled’ package from an insurance company.

The scheme is set up by completing an employer’s proposal form and a trust deed, and these documents will typically appoint the insurance company selected as:

- The registered administrator

- The investment manager

- In many cases the insurer of any life assurance and disability benefits.

As registered administrator the insurance company will be responsible for:

- Maintaining the administration records for the scheme

- Preparing and issuing annual benefit statements

- Preparing and issuing the trustee annual report.

From a legal perspective, the trust deed establishing the scheme will normally adopt the insurance company’s standard set of rules, which are structured in a generic fashion, and the specific details of the scheme will be reflected in either a scheme booklet or similar notification to scheme members.

The insurance company will also provide the investment management for the pension scheme assets and this is normally arranged through unit-linked funds. In some cases, the insurance company will have their own in-house investment manager. In others, external managers are used with a view to providing a greater sense of independence but also greater investment diversification and choice.

In some cases, an employer will use an insured scheme to provide pension benefits but they will have the legal documents, the trust deed and rules, drafted separately.

(2) Self Administered SchemeIn many cases, larger company pension schemes will also use the insured bundled product but in some cases, employers will adopt the self administered approach. This means that the different services involved are provided separately but are linked.

A self administered scheme can be operated by an insurance company but more usually they are provided by the larger pension consultancies.

The provision of the different service elements as separate components can provide larger pension schemes with a greater degree of flexibility. Typically, the registered administrator will be the pension consultancy and they will provide the core administration services, including maintenance of records and the production of annual benefit statements and the trustee annual report.

The legal documents, the trust deed and rules, are usually scheme specific and will be drawn up by either the consultancy’s own legal department or more usually by a firm of solicitors.

With a self administered scheme, the investment of the pension assets is a separate arrangement and usually will involve the appointment of one or more investment managers. The assets of the scheme are held on a pooled basis and it is necessary for the registered administrator to match up the scheme assets with each individual’s own pension account.

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The ability of a self administered scheme to add or change investment managers or funds is perceived to be a particular advantage of this approach. Against this, insured schemes are now in most cases offering a wide range of choice both in relation to the number of fund managers and the number of funds. This enables them to compete with other self administered schemes in terms of investment choice and diversification.

(3) Small Self Administered SchemeSometimes there is confusion between a self administered scheme and a small self administered scheme. A small self administered scheme operates in many respects like a self administered scheme but it is also subject to some very specific additional Revenue requirements because of the membership of the scheme.

A small self administered scheme is established for the business owner or for a small number of directors /senior personnel. Because of the nature of the membership a Revenue concern is that the scheme, if controlled by the business owner and / or directors / senior personnel, could be wound up and the assets distributed.

They therefore require the following additional features:

- The appointment of a pensioneer trustee. A pensioneer trustee is an individual who has been specifically approved by the Revenue Commissioners. The requirement to have a pensioneer trustee is to ensure that the trust is administered correctly and solely for the provision of retirement benefits for the scheme members.

- The production of annual accounts.

- The production of an actuarial valuation every three years.

- Additional Revenue restrictions on the investments of the scheme.

Apart from these specific requirements, the small self administered scheme will operate in broadly the same way as a self administered scheme.

The Financial Broker involved may also act as pensioneer trustee and will provide, as part of the service, the necessary administration, legal documentation, accounting and actuarial services. To qualify for pensioneer trustee status, the applicant must be widely involved with occupational pension schemes and their approval. Experience in processing approval of schemes, administration of small self administered schemes and a good working knowledge of Revenue practice are necessary qualifications. The investment strategy will be as decided by the individual member in conjunction with the Financial Broker. This can range from putting money on deposit to investing in insurance companies’ unit-linked funds or other pooled investment funds, but more frequently involves investment in specific stocks and shares and / or property.

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Scheme Design

Having decided on the type of scheme to be used, the next step is to ‘design’ the scheme to suit the employerand their circumstances. The following are the issues that need to be considered.

6.1 Normal Retirement Age A company pension scheme must have a normal retirement age of between 60 and 70. Traditionally in Ireland most company pension schemes used a normal retirement age of 65, as this tied in with the commencement of the State Pension. Some schemes will use age 60, while very few use age 70. With the increase in the State Pension age to 66 from 2014, 67 from 2021 and 68 from 2028, the debate has started as to whether an employer should change the normal retirement age (and the date that employees will continue working to) to mirror the State Pension age.

6.2 Early Retirement Revenue will permit early retirement at any stage from age 50 (or at any age due to ill health). Normally, early retirement is only permitted in a company pension scheme with the employer’s and / or trustee consent. Specific rules apply for a 20% director going on early retirement. In practice, if any employee wishes to leave service before normal retirement age, there is little that an employer can do to stop them and it would be normal practice not to restrict access to their pension benefits. Unlike a Defined Benefit scheme, there is no financial impact for the scheme if an individual draws down benefits early from a Defined Contribution scheme.

6.3 Late Retirement Late retirement is a completely different matter and this will require specific consent from the employer.There are a number of elements to this and the employer can decide if late retirement is being permitted, and the conditions / details that will apply. From an employer’s point of view, will allowing an employee to continue working: A. Create a precedent for other employees?

B. Block promotion / career progression?

In relation to pension and risk benefits, the different issues to be considered are:

- Pension contributions may or may not be paid by the employer and / or the employees.

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- The issue of any risk benefits needs to be considered. Disability cover normally cannot be provided beyond age 65, whilst the continuation of life cover beyond the normal retirement age of a scheme will

usually require underwriting to be completed. Once the basis of late retirement has been decided by the employer it is essential that this is communicated in writing to the affected employee.

6.4 Eligibility Conditions – General This is a key element in the design of a company pension scheme as it will determine which employees can join the scheme and when. It is entirely for each employer to decide on the eligibility conditions that should apply to a company pension scheme but they should bear in mind:

(1) A standard PRSA facility has to be made available if employees must have more than six months’ service to be eligible to join the pension scheme.

(2) Equal treatment provisions.

6.5 Eligibility Conditions – Risk Where life cover and / or disability benefits are being provided for employees, ideally this cover should apply from as early a date as possible and preferably from the date that they join the company. While it is possible to have a waiting period, either service related or age related, before risk benefits apply, an employer is leaving itself open to a problem should an employee either die or become disabled prior to becoming eligible. Usually, it is younger employees that are involved and the additional cost of covering these individuals from the date they begin service is minimal.

6.6 Eligibility Conditions – Pension Benefits Eligibility for joining the pension scheme is a different matter. Again, the criteria should be designed to suit the employer’s particular set of circumstances and objectives in relation to the pension scheme. In some cases, an employer may wish to include employees in the pension scheme from an early date as they see this as part of the overall remuneration package and a way in which to attract new employees to the company. In other cases, the company may have a significant turnover of staff and the eligibility conditions in these situations can be designed to ensure that these short term employees are not included in the pension scheme. A scheme for example may be set up with the following eligibility conditions:

You will be included in the scheme for life assurance cover immediately on joining the company. Theprovision of this cover may be subject to medical underwriting by the scheme’s insurers. If this affectsyou, you will be notified. You have the option of joining the scheme for pension benefits provided you:

A. have completed two years’ service with the company and

B. are over the age of 25.

Membership of the pension scheme is voluntary but in view of the generous benefits provided bythe scheme you are strongly advised to consider joining.

6.7 Contribution Rates A company pension scheme can be set up on a non-contributory basis with the employer paying a contribution for all eligible employees or, more typically, on a contributory basis with both the employer and employees making contributions. The level of contribution to be paid by the company and the employees can be decided by the employer based on their own particular set of circumstances and budget.

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6.8 Minimum Employer ContributionA company pension scheme is required to have a minimum employer contribution for it to be an approved scheme. The minimum employer contribution can be met in one of two ways: (1) The employer must contribute a minimum of one-tenth of the total contribution being paid

into the scheme – excluding AVCs. (2) A specific employer pension contribution is not required if the employer is paying for the cost of life assurance cover and is covering the fees associated with running the pension scheme. This could be where (apart from the annual management charge) the employer is paying a

specific fee for the running of the scheme or in an insured arrangement is being invoiced for the charges, i.e. the contribution charge and the policy fee.

Pension adequacy is a significant issue for many employees, where even though they are included in a company pension scheme, they may end up with a relatively small retirement fund to live on. Where an employer has established a company pension scheme with a minimum employer contribution it is vital for all concerned to be aware of the implications of the type of scheme that is being set up. While a matching employer / employee contribution of say 5% would be considered a typical level of pension funding, a scheme with a minimum employer contribution still has some advantages: (1) While the scheme may start with a minimum employer contribution, over time the level of contribution

may be increased either for all members, or for members on completion of a certain number of years’ service or membership of the pension scheme.

(2) A minimum employer contribution and the establishment of a company pension scheme allows

employees to save for their retirement through a company pension scheme rather than a PRSA. Following on from this, because the overall level of funding involved will be low the likelihood is that the bulk of the funds built up at retirement could be taken as a retirement lump sum by the employee as opposed to a maximum of 25% of the fund if pension funding was through a PRSA. A company pension scheme can be set up on a non-contributory basis with the employer paying a contribution for all eligible employees or, more typically, on a contributory basis with both the employer and employees making contributions. The level of contribution to be paid by the company and the employees can be decided by the employer based on their own particular set of circumstances and budget.

6.9 Typical Contribution Rates In Ireland the norm for a company pension scheme is a total contribution of 10%, with 5% being paid by the employer and 5% by the employee. These contributions can be based on whatever salary figure the company wishes to use but again the norm is that the contributions would be based on an individual’s basic annual salary. While contribution rates of 5% employer and 5% employee is the norm, obviously other contribution levels may be agreed. For lower paid workers, a contribution rate of lower than 5%, e.g. 3%, is sometimes used while in other cases, a higher employer contribution may be applied for senior employees, e.g. an employer contribution rate of 10% and an employee contribution rate of 5%. Some schemes may have a tiered contribution scale where a higher contribution rate is available after a number of years’ employment or scheme membership.

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Example

Years in pension scheme Employer Contribution Employee Contribution

1 – 5 years 5% 5%

5 – 10 years 7.5% 7.5%

10 years + 10% 10%

Note: Where an employee is required to make a contribution to benefit from a corresponding employer contribution then these

contributions must be recorded as employee contributions. They cannot be recorded as additional voluntary contributions.

6.10 Additional Voluntary Contributions Additional voluntary contributions (AVCs) are contributions paid by employees over and above any contribution that is required of them to be a member of the scheme. The need for AVCs to be a part of a group scheme is an important principle to establish with an employer from the outset. It means that the Financial Broker can then promote AVCs and they are seen as improving the scheme benefits, rather than undermining the benefit of the scheme itself (see Chapter 7).

6.11 Equal Treatment Company pension schemes are not allowed to discriminate between employees on a number of grounds relating to personal and employment status. (a) Personal StatusSchemes cannot discriminate against a person on any of the following personal grounds: - Gender - Civil Status (previously marital status) - Family Status (pregnancy or parental status) - Sexual orientation - Religious beliefs - Age - Disability - Race, nationality or ethnic origin - Membership of the Traveller Community It is possible however for schemes to provide different levels of benefits for married persons / civil partners and may also provide that pension contributions increase as people go into higher age brackets (b) Employment StatusPart-Time Employees. In the past many company pension schemes only catered for full-time employees. Following legislation in 2001 (The Protection of Employees (Part-Time Work) Act, 2001) this can no longer be the case. For pension purposes this means that part-time employees should be entitled to join the employer’s pension scheme or a separate scheme set up by the employer for part-time employees which provides equivalent benefits. Their scheme benefits should be pro rata to those for equivalent full-time employees. Less favourable treatment under pension schemes is only allowed if the part-time employee works less than 20% of the normal hours of an equivalent full-time employee. There is also an exemption to the requirement to provide equivalent benefits for part-time employees where the discrimination can be objectively justified based on a legitimate business objective of the employer, and that the different treatment is appropriate and necessary. The grounds for the different treatment cannot be the part-time status of the employee. It is difficult to prove objective justification and as a rule part-time employees should be treated the same as full-time employees in relation to benefits provided under pension schemes.

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(c) Fixed-Term Contract employeesLegislation introduced in 2003 (The Protection of Employees (Fixed-Term Work) Act, 2003) means that in many cases employers will need to make their company pension schemes available to fixed-term contract employees. A temporary fixed-term worker cannot be treated less favourably than a comparable permanent worker in respect of pay, pensions and all other conditions of employment unless they work less than 20% of the normal hours of the comparable permanent employees. Less favourable treatment is also permitted where the discrimination can be objectively justified based on a legitimate business objective of the employer, and that the different treatment is appropriate and necessary. The discrimination cannot be justified based on the fixed-term status of the employee. As with part-time, it is difficult to prove objective justification. In the case of fixed-term contract employees (not part-time) the provision of equivalent overall benefits from employment will be regarded as an objective justification for less favourable treatment in relation to pensions — presumably on the basis that someone on a short-term contract may value other more immediate benefits more than pension provision. In all cases (both part-time and fixed-term) where an employer intends to apply less favourable treatment, the employer should obtain legal advice.

6.12 Benefits on Leaving Service Under pension legislation, a member who leaves a pension scheme having been a member for two years or more is entitled to a benefit based on the value of both the employer and employee contributions. If an individual leaves having been a member for less than two years then their entitlement under pension legislation is based on the value of their own personal contributions (including any AVCs). This rule is adopted by most company pension schemes in Ireland although it is possible, should the employer wish, to provide immediate vesting on the scheme. This would mean that an employee on leaving service at any time will have an entitlement based on both the company and their own contributions (including AVCs). If a scheme provides immediate vesting, the employee still has the option on leaving employment if they have less than two years’ membership of the pension scheme to take a refund of the value of their own contributions less tax, currently at 20%. In this situation however, the employee would lose the benefit of the value of the employer contributions, which would be returned to the employer. A point that is often overlooked by Financial Brokers is that should a member of a pension scheme transfer in the value of a preserved benefit from a previous pension scheme, then the service in the previous pension scheme will count towards the two year limit and effectively will provide the member with immediate vested rights. Most employees with less than two years’ pension scheme membership will opt to take a refund of the value of their own contributions. For members with more than two years’ membership, there are a number of options available: - They can leave the value of their fund within the pension scheme

- They can transfer the value of their pension scheme to their new employer’s pension scheme

- They can transfer the value to a Personal Retirement Bond

- Subject to certain conditions they can transfer to a PRSA Largely through apathy / inactivity, a considerable number of members simply leave their benefits paid up in the pension scheme of their previous employer. This can cause administration problems for both trustees and employers as it means that the individual concerned is still a member of the scheme.

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Most trustees and employers would prefer if deferred members took their benefits out of the scheme. Where there are more than 100 members in a pension scheme (this is calculated based on the number of active and deferred members) the trustee annual report and accounts need to be audited, which involves an extra cost for the employer of €3,000 p.a. upwards.

6.13 Investment of Contributions Whilst the trustees of a company pension scheme can decide where contributions are invested on behalf of the members, it is now considered best practice to offer members a choice of funds. Another important point to bear in mind is that trustees can avail of an indemnity provided by pension legislation where three certain conditions are met, namely: - A suitable range of funds is provided

- A default strategy is provided

- Members are given sufficient information to enable them to make an informed decision. The whole area of investment choice is covered in greater detail in Chapter 8.

6.14 Risk Benefits Risk benefits – death in service and / or disability benefits – are frequently included as part of a company’s benefit programme for employees. The benefits that can be provided and the issues involved are covered in detail in Chapters 15, 16 and 17.

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Additional Voluntary Contributions

Most company schemes in Ireland operate on a contributory basis, with employees required to make acontribution, typically 3% or 5% of their salary, with a corresponding employer contribution.

There are incentives to encourage individuals to save for their own retirement through the provision of tax reliefon additional voluntary contributions.

While there have been certain changes in pension legislation in recent years e.g. the introduction of a maximumfund threshold and the abolition of PRSI relief, the granting of tax relief at an individual’s marginal rate (20% or41%) has been maintained.

The following are the maximum contributions that can be paid by an individual as a percentage of salary (including the employee contribution they are required to make to the company pension scheme) and for whichthey can receive tax relief:

Age Percentage of Salary

Up to 30 15%

Age 30 – 39 20%

Age 40 – 49 25%

Age 50 – 54 30%

Age 55 – 59 35%

Age 60 and over 40%

In all cases, the maximum salary on which tax relief on personal contributions can be obtained is €115,000.

Encouraging scheme members to pay additional voluntary contributions (AVCs) is an obviousway in which a Financial Broker can generate additional income from the scheme.

A number of insurance companies have specific programmes to promote the payment of AVCs. This will ofteninvolve the provision of an individual report for each member giving an indication of the likely pension benefit thatwill emerge at their retirement and the scope they have to pay in an AVC. When a member starts to make an AVCit is normally done through payroll in the same way as their ordinary employee contributions and as a result, taxrelief is provided automatically.

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It is also possible for a member to pay in a once off AVC and this typically will be following the receipt of a bonusor at the end of October / mid November each year, when an employee can make an AVC in respect of theprevious tax year where they have unused tax relief from that year.

Financial Brokers should try and establish when bonuses are awarded / paid by companies so that they canlink up with individual members to see if they wish to minimise the tax impact of the bonus by paying asubstantial AVC. Likewise Financial Brokers tend to overlook the fact that pension scheme members have thesame facility as their self employed counterparts to pay in a contribution before the end of October / midNovember each year and to offset the contribution against the previous year’s tax bill in respect of any unused tax relief.

Two important points to bear in mind: (1) For an individual to pay an AVC in respect of the previous year, they must be in the same employment, and (2) They must claim (from their tax office) the relief against the previous year’s income and the claim must also be made by the end of October / mid November deadline.

7.1 Treatment of AVCs Once paid into a company pension scheme, AVCs are recorded separately from ordinary employee contributions. This is important as in a number of situations the fund built up by AVCs is treated differently to that built up by employee and / or employer contributions.

7.2 AVC Drawdown It is possible for an individual between now and March 2016 to draw down up to 30% of any AVCs that have been built up in a company pension scheme. The amount withdrawn will be taxed at the individual’s marginal rate but no PRSI or USC levy will be deducted.

Although the objective of paying AVCs in the first place is to supplement an individual’s retirement benefits, in the current economic climate this withdrawal facility will be of benefit to some individuals who need access to funds on a short term basis. If a member avails of the AVC drawdown facility, the Financial Broker should encourage the individual to make up the amount by increasing the regular AVCs being paid.

7.3 ARF Option at Retirement Whilst the ARF option is now a standard feature of company pension schemes, it is only available if an individual takes the option of 25% of the accumulated fund as a retirement lump sum rather than the traditional 1.5 times final salary. If an individual opts to take the retirement lump sum calculated based on salary and service then the balance of any employee and employer contributions must be used to purchase a pension. The ARF option only applies to AVC funds. As a result it is vital that AVCs are categorised correctly.

7.4 Death in Service In the event of a member’s death in service, the value of any AVCs can be paid out as a lump sum together with the value of any employee contributions. This is in addition to the maximum lump sum death in service benefit of four times salary.

7.5 PRSA Transfers Under pension legislation, if a PRSA is transferred into a company pension scheme, then the amount transferred will be categorised as an AVC and treated as such regarding the payment of future benefits. The one important exception to this is that PRSA transfers, although categorised as an AVC, cannot be accessed under the AVC drawdown facility.

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7.6 Investment of AVCs AVCs can be invested in the same fund as employer / employee contributions or can be invested separately (provided this is possible with the registered administrator’s administration system). The logic for investing AVCs in a different fashion is that at retirement the member may be availing of the ARF option with their AVC fund, whereas the balance of any employer / employee contributions after the payment of the retirement lump sum may be used to purchase a pension. The choice of investment funds for AVCs ( and all contribution types ) becomes increasingly significant in the run up to retirement.

7.7 AVC PRSA It is standard practice for a company pension scheme to have an AVC facility incorporated into the scheme. If it does not then the employer is required to provide an AVC PRSA facility. Whilst most individuals will prefer the convenience of paying an AVC through payroll, in some situations an individual AVC PRSA may be more suitable for the client. Making AVCs through the employer’s payroll and therefore having details of those AVCs incorporated in a benefit statement may be the very reason why employees might prefer paying into an individual AVC PRSA. This stems from the nature of AVC PRSAs, which provide a certain element of confidentiality.

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Disability CoverInvestment of Contributions

In a Defined Contribution pension scheme, the investment return achieved on contributions is crucial andwill have a significant impact on the eventual retirement fund that the member receives. The trustees of a company pension scheme can:

- Make the investment decisions on behalf of all members, or

- Provide members with investment choice.

The trustees can avail of an indemnity provided by legislation (Pensions Amendment Act, 2002) in offering choice to members provided certain conditions are met.

In particular, the conditions needed for trustees to be able to avail of the indemnity are:

- A suitable default investment strategy must be provided into which contributions will be invested where a member does not want to make an investment decision themselves

- A suitable choice or range of funds is provided

- Members are provided with “sufficient information to enable them to make an informed decision”.

8.1 Default Investment Strategy Realistically, the majority of scheme members will be invested in the default investment strategy, and in view of this it is an important decision to be taken by the trustees. In selecting the default investment strategy, the trustees should take account of the scheme membership and the likely benefits that will be taken at retirement. It is generally considered that a lifestyle investment strategy is most suited as the default investment strategy for Defined Contribution pension schemes. Most default investment strategies put an emphasis on growth in the early years and as retirement approaches will gradually move the member out of growth assets such as equities and into funds that will safeguard the purchasing power of their fund at retirement. This will usually involve a switch to a mixture of long dated bonds (to match the purchase of the pension element) and cash (to match the retirement lump sum payable under the scheme). As the switch to long dated bonds is designed to track the cost of buying a pension, it is possible for a lifestyle strategy to have a negative return in the run up to retirement. Whilst this can come as a surprise to some members, the reason for the drop in value is that there has been a corresponding reduction in the cost of purchasing a pension and therefore although the monetary value of the fund may have dropped, the expected pension can still be purchased for the member.

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Other default investment strategies may be appropriate for those individuals who wish to avail of the ARF and / or lump sum option at retirement rather than the purchase of a pension.

8.2 Suitable Range of Funds The Pensions Authority (previously known as the Pensions Board) in a recent publication suggested that a suitable range of funds might be between five and seven but that depending on particular schemes and the profile of the scheme membership, other fund ranges could be considered. As a result, there is no hard and fast rule in relation to investment choice, although clearly providing too much choice can actually be counterproductive and can confuse and overwhelm members. In arriving at a suitable range of funds, trustees and their Financial Brokers should take account of the pension membership and how financially knowledgeable they might be. Ideally, there should be a fund(s) in each of the different risk categories, thereby ensuring that there is a fund to suit each member and their own personal attitude to risk. At this stage the industry has largely aligned itself to the European Securities and Markets Authority (ESMA) risk categories, which provides a standardised approach to the classification of funds within easily identifiable risk categories. This should be of benefit to Financial Brokers, trustees and scheme members alike. The risk categories are as follows:

ESMA Rating Category

1 Very Low Risk

2 Low Risk

3 Low to Medium Risk

4 Medium Risk

5 Medium to High Risk

6 High Risk

7 Very High Risk

Within each of these risk categories an insurance company will have a number of different funds that a scheme can adopt. These funds will include those that are actively managed, relying on the decisions of one investment manager with the expectation that they will achieve above average / top quartile performance; or passively managed, where the return is designed to be in line with a particular investment index, e.g. in line with the FTSE / NASDAQ etc. For the last fifteen to twenty years the consensus managed fund approach has been popular, whereby the objective is to match the average return from the pension investment managers operating in the Irish market. Following the collapse in equities in 2008, there has been an increase in demand for funds that have risk management as a key element of their strategy, and over the same period there has been an increase in absolute return funds rather than the traditional managed fund approach. Irrespective of what funds are selected, it is crucial that both the trustees and scheme members understand what each fund can or cannot do. The lesson in relation to managed funds in 2008 needs to be learnt. The fact that a typical managed fund had an equity weighting of between 60% and 80% and could not go outside these limits was not understood or appreciated by trustees and members alike, who expected a ‘managed’ fund to be able to divest itself of all its equities should the need arise.

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8.3 Member Communication Having decided to offer investment choice, one of the important aspects is to ensure that members are made aware of the choices that are available to them and that they know where to seek more information and / or advice on the different options. It is important that this requirement in relation to information is met not just when a member joins the company pension scheme but throughout their working life, and in particular as they start to approach retirement. In providing information / advice it is crucial that members have a full understanding of what a fund can and cannot do. Members for example may consider a cash fund to be ideal as it is a secure investment; however the likelihood is that the relatively low return from a cash fund will be outpaced by the rate of inflation and even in some cases the charges that apply to the fund. The information document given to members should also cover issues such as: - A note confirming that the trustees have no liability in respect of the performance of the funds.

- How they can switch between the different funds.

- The investment management charge associated with each of the fund options.

- Who to contact in relation to queries.

8.4 Online Information Ensuring members have ongoing access to information in relation to the fund options can be challenging. The Internet can play a significant role here and many insurers have an online facility that can provide members with a direct link to up-to-date information on investment funds including asset splits and performance.

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Disability CoverBenefits at Retirement

A member of a company pension scheme has a range of options available to them when they reach their normal retirement age (NRA) and in the event of early or late retirement.

Option A - A retirement lump sum can be taken, calculated using the service completed by the individual and their final remuneration.

- The maximum retirement lump sum that can be taken is 1.5 times final remuneration and this is available provided:

(a) The individual is at their NRA.

(b) They have completed at least 20 years’ service with the same employer ending at NRA.

(c) They have no retained benefits (if there are any retained benefits, the maximum retirement lump sum payable from the scheme will be reduced by the lump sum available or received from the previous pension arrangements (the retained benefits), subject to a minimum of a retirement lump sum of 3/80ths of final remuneration for each year of service).

If a member opts for this retirement lump sum, then the balance of the fund built up by employer and employee contributions must be used to purchase a pension for the member and / or their dependants.

The ARF option will be available for any AVC funds that have been built up by the member.

The type of pension can be selected by the member to suit their own particular set of circumstances and can be one of the following:

- A level pension payable until the death of the member.

- A pension that will continue at either 100% or a reduced level to the member’s spouse / civil partner or dependant on death in retirement.

- An escalation factor – e.g. 3% p.a. can be added to the member’s and / or the spouse’s / civil partner’s or dependant’s pension.

It is also possible to build in either a five or a ten year guarantee on the member’s pension, guaranteeing a certain minimum payment if the member should die prematurely. Although pensions are always payable until the death of the member, having a minimum guarantee period means that the pension will continue to be paid for the remainder of the guarantee period if the pensioner dies within the initial guarantee period.

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If the guarantee period is five years or less, the value of the remaining payments can be paid as a lump sum. If the guarantee period is more than five years, the payments are paid as regular (normally monthly) payments until the end of the guarantee period.

When advising members in a retirement situation it is important to provide them with a range of options. Some of the options are relatively inexpensive while others are relatively expensive. The following table based on a male life, aged 65 and with purchase money of €200,000 illustrates the type of pension that can be provided. The sample rates below are based on New Ireland annuity rates applicable as at April 2014.

Type of Pension Annual Pension

Level single life pension €10,140 p.a.

Joint life pension with a spouse’s / civil partner’s pension of 2 / 3rds of the member’s

€8,600 p.a.

Single life pension increasing at 3% p.a. compound

€6,920 p.a.

Joint life pension, spouse’s / civil partner’s pension of 50% both increasing by 3% p.a.

€5,760 p.a.

Note In all of the above cases, a five year guarantee period has been included.

Option BAlternatively, the member can decide to take 25% of the accumulated fund at retirement as a retirement lump sum. If this lump sum is chosen then the member can avail of the ARF-type options in relation to the balance of the fund provided certain minimum conditions are met. One particular advantage that this option has is that part or all of the ARF can be used to purchase an annuity for the member, so arguably by availing of the ARF option the best of both worlds can be achieved. The choice made by a scheme member will largely be influenced by the amount of the retirement lump sum that is available under each option. In many cases, because of the fact that the overall fund that is built up is quite low, a significant percentage or in some cases all of the fund that has been built up can be taken as a lump sum.

9.1 Taxation of Retirement Lump Sums Where a retirement lump sum is taken, the following tax applies:

- The first €200,000 can be taken entirely tax free ( any lump sums taken on or after the 7th of December 2005 will count towards this €200,000 cap )

- The next €300,000 is taxed at 20%.

These are aggregate limits applying to all pension lump sums taken on or after the 7th of December 2005.

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The Social Welfare and Pensions Act 2008 introduced compulsory training for trustees of company pensionschemes.

The requirement for training commenced on 1/2 /2010 and for existing trustees the initial training had to becompleted by 1/2 /2012. Where a new trustee is appointed, the initial training must be completed within sixmonths of their appointment.

The training needs to be repeated every two years.

The training applies to all trustees. Where there are individual trustees each of the trustees must complete the training and where the company is acting as trustee then all the directors of the company must be trained.

The introduction of compulsory trustee training has led to a major shift in the trusteeship of company pensionschemes, with many employers resigning as trustees and appointing corporate trustees in their place. The needfor trustee training and a realisation of the responsibilities involved has also led to many individual trustees beingreplaced by corporate trustees.

10.1 Training Courses For those that still require training, there are a wide range of options available. The Pensions Authority maintains a register of approved trustee trainers but does not approve specific courses. Their requirement is that the training provided must be adequate. The Pensions Authority provides an online trustee training facility, which is free but takes a minimum of nine hours to complete. Training courses are also provided by a number of insurance companies, Financial Brokers and organisations such as the Irish Association of Pension Funds. In terms of content, the training will vary depending on who is providing it but usually the training course will be between two and four hours, with attendees receiving a certificate confirming that they have received the training. Typically there is a cost involved and this will vary depending on the organisation providing the training; it varies between €200 and €500 per individual trustee. Fees for participating in a trustee training course are not liable for VAT.

10.2 Individual Pension Arrangements The Pensions Authority allows the trustees of individual pension arrangements to fulfil their training obligations by reading / studying a training booklet, which typically can be downloaded from insurance companies’ websites. The logic here is that in most cases, the trustee, employer and member would be one and the same person, therefore the level of training required is not as detailed as for a group scheme where there are ‘arms length’ employees involved.

Trustee Training

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Having established a company pension scheme, it is important to ensure that the scheme is managed onan ongoing basis so that not only the benefits and contribution rates are kept fully up-to-date, but alsoopportunities for developing the scheme and generating additional income are identified.

11.1 Renewal Date Company pension schemes will have a renewal date, and this acts as a trigger point for:

- The updating of membership data, salaries, contributions and benefits

- The production of annual benefit statements

- The production of the trustee annual report. The renewal date does not have to be the anniversary of the commencement date but should be a date agreed between the Financial Broker and the employer to suit the employer’s particular set of circumstances. The choice of renewal date could be dictated by the employer’s financial year end and / or the date when employee salaries are reviewed.

11.2 Inclusion of new entrants Frequently employees can be included in the scheme from the date they joined the company for life assurance and / or disability cover benefits, but generally there is a waiting period before they can be included / join for pension benefits. (1) Death and Disability Benefits It is important to establish the insurance companies’ requirements to include new entrants. Generally, where there are 15 members or more in a scheme, cover will be provided automatically up to the non medical limit (see Chapter 15) and there is no need to notify the insurance company as and when each employee joins. Instead, the notification is included as part of the renewal process. (2) Pension MembershipWhile it is possible for the membership of the pension scheme to be a condition of employment, normally pension membership is on a voluntary basis. It is important for a Financial Broker to work with a company – either the HR department or whoever looks after the pension scheme – in order to fully understand: - When an employee become eligible (e.g. after two years’ service and attaining age 25)?

- Once eligible are they included immediately or at the following renewal date? - If they are to be included immediately how is the Financial Broker notified?

SchemeManagement

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Even when employees are included immediately for life assurance cover, it is good practice to try to engage with them as early as possible, so that: - They are aware of the benefits being provided under the scheme and are given the opportunity to complete a letter of wishes (the purpose of this is to indicate to the trustees who they would like the benefit to be paid to in the event of their death)

- By engaging with them, the Financial Broker can establish when they will become eligible to join the pension scheme and a note can be made to make contact with them at that stage - The Financial Broker can start the process of ‘converting’ them to personal clients.

11.3 Waiver Form Where pension membership is on a voluntary basis, it is advisable to ensure that waiver forms are used. The principle behind a waiver form is that an employee either joins the scheme or, if they choose not to join, they sign a form acknowledging that they have received information in relation to the scheme and have made an informed decision not to join. The completion of a waiver form is a valuable protection for both the employer and the trustees. On a practical basis it will also assist the Financial Broker in that it should increase the number of employees who join the scheme. A typical wording in relation to a waiver form would be as follows:

Dear TrusteesI wish to advise that I have received information in relation to the pension scheme but have decidednot to join at this stage. I understand that as a result of my decision, neither I nor my dependants willreceive any benefits under the terms of the pension scheme. I also note that should I decide to jointhe pension scheme at some date in the future this will be at the sole discretion of the employer andtrustees and that no arrears of company pension contributions will be paid.

11.4 Meeting New Members Whilst there is no legal requirement for a Financial Broker to meet new members of the company pension scheme, where possible a new member should be met with a view to:

- Explaining the scheme benefits

- Going through the investment funds that are available - Completing a wishes form if not already completed - Discussing the possibility of AVCs

- Identifying whether the individual has any previous pension benefits and whether advice is required in relation to them. Dealing with AVCs, letters of wishes and previous pension benefits will provide the Financial Broker with a platform from which to sell other financial services products to the scheme members and to ‘convert’ them to personal clients rather than just members of the company pension scheme.

11.5 Risk BenefitsThe annual renewal will involve the updating of the membership of the scheme and obtaining revised salaries. While the non medical limits for both life cover and / or disability cover will ensure that most members are covered for their full benefits without any underwriting, there may be some exceptions and these need to be monitored carefully.

Underwriting requirements, completion of proposal forms, attending medicals etc. need to be followed up diligently and where underwriting remains outstanding, it is important to ensure that the member

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concerned, the employer and the trustees (for life cover) are fully aware of the cover that should be in place and the steps needed to bridge the gap.

11.6 Civil PartnersThe Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010, which came into force on 1/1/2011, extended marriage like benefits to same sex couples in registered civil partnerships in the areas of property, social protection, succession, maintenance, pensions and tax.

There are a number of significant ramifications for pension schemes as a result of this legislation.

As outlined in the previous section it allows for civil partners to apply for Pension Adjustment Orders (PAOs). It also means that where previously different levels of benefit were provided for married and single people, now the benefits applicable to a married person must be extended to a registered civil partner. Typical examples of this would be where life cover of four times salary is provided for a married member and twice salary for a single member, or alternatively where in addition to a lump sum death benefit, there is a specific spouse’s death in service pension provided.

For employers, trustees and the Financial Broker for the scheme, ensuring that the correct cover is applied to all members can be difficult.

The communication of the potential benefits to members is important and to protect both the trustees and the employer it is recommended that the onus of requesting and obtaining any additional cover is placed on the members.

The following suggested wording could be considered:

“The company provides a lump sum death in service benefit of twice salary for all employees from the date they join the company. There is an additional lump sum death in service benefit of twice salary that is available to members who are either married or in a registered civil partnership. To avail of this additional cover a member who gets married or enters into a registered civil partnership must apply to the trustees for the additional cover to be provided to them.”

11.7 Registered Administrator / Renewal DeadlinesThe Social Welfare and Pensions Act 2008 introduced the principle of a registered administrator. Every company pension scheme needs to have a registered administrator, and typically this would be the insurance company that is providing the administration services.

The registered administrator is required to fulfil certain duties and obligations and their activities are monitored and supervised by the Pensions Authority.

The key obligations of a registered administrator are: - To maintain proper records

- To produce annual benefit statements within five months of the renewal date - To produce trustee annual reports within eight months of the renewal date

The five and eight month deadlines are to ensure that trustees, in order to be able to discharge their own obligations, have at least one further month to issue benefit statements (within six months) and to finalise the trustee annual report (within nine months).

Most registered administrators will operate to shorter timescales – typically within three months of the renewal date. The renewal process and preparation of the trustee annual report and audited accounts of larger schemes (100+ member schemes) will take longer so this should be taken into account, as the deadlines mentioned above remain the same for such schemes.

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Where renewal data remains outstanding, the insurance company / registered administrator will usually issue the renewal on a ‘no change’ basis so that they can meet their compliance deadline. A no change renewal is unsatisfactory and it is important to ensure that revised data is obtained so that the scheme can be renewed properly.

11.8 Annual Benefit StatementsThe issuing of annual benefit statements is an ideal opportunity for the Financial Broker to engage with the scheme members and typically this can be done by arranging one to one meetings with the members, or by holding a pensions clinic.

This engagement with members will allow the Financial Broker to reiterate the benefits of the company pension scheme, answer any queries the members may have and also identify opportunities such as AVCs.

11.9 AVC PromotionMost insurance companies can provide Financial Brokers with an AVC report for scheme members. This will identify the likely benefits that will emerge at retirement based on current contribution rates and will show the effect of paying in AVCs, e.g. an additional 5% contribution each year or the estimated AVC required to bring the expected pension up to a particular level, say, 50% of salary.

If managed properly an AVC initiative such as this can be beneficial and can generate additional income for the Financial Broker. Whilst an AVC report can be prepared for each individual, it is important to analyse the information received and to use the information in as effective a way as possible.

Priority / emphasis could be given to particular categories:

- Those on higher salaries and who may have a greater interest and have more affordability

- Members over the age of 50, where planning for retirement is likely to be a higher priority

11.10 Tiered Contribution RatesWhilst most schemes operate on the basis of the same level of contributions for each member over their working career, in an increasing number of schemes, tiered rates are being used. This involves an increase in contributions from the employer or employer and employee on completion of a certain number of years of service (company / scheme) or on attaining a certain age.

It is important that this is monitored by the Financial Broker so that members are identified when they become eligible for increases in contributions.

This typically will involve engaging with the member to establish whether they wish to increase their own employee contribution and as a result benefit from an increase in the employer’s contribution rate. Because there is usually an element of matching, this should be an easier sale than a straightforward AVC with no matching from the employer.

In some cases, the increase in employer contribution will be automatic because the employee is already paying the required level of contribution as they have already been paying AVCs.

Example. The company scheme is contributory based on the following contributions:

Year of Service Employer contribution Employee contribution

1 – 5 years 3% 3%

5 – 10 years 5% 5%

10 years + 7.5% 7.5%

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An employee has been a member of the scheme for five years and in addition to paying the 3% employee contribution has been paying an AVC of 2%. In this case, when the individual has completed five years’ service the employer contribution should increase automatically to 5% and the 2% AVC should be reclassified as an employee contribution.

11.11 Leaving ServiceWhen an employee leaves service it is important to provide advice in relation to their benefit options and their future plans. It also serves as a good business opportunity for further business / income to be generated by the Financial Broker.

There are a number of issues to be covered and they can be addressed as follows: - Where is the employee going?

- Are they setting up a business on their own?

- If setting up on their own do they need pension / risk benefits?

- Alternatively if are they joining another company will they be joining in a position of influence e.g. HR manager / financial controller?

- If they are joining another company, does that company have a pension scheme and if so is there an opportunity to review them?

In relation to the scheme that is being exited, there are two specific areas that need to be addressed.

- The leaving member will automatically receive options in relation to the benefits that have built up. In many cases and for a variety of reasons the benefit is left paid up whereas as an alterative, it could be transferred to a personal retirement bond or to the pension fund of the individual’s new employer.

- If there are risk benefits on the scheme, then usually there will be a continuation option in relation to the life assurance benefits and also (although less frequent) a continuation option in relation to disability cover.

A continuation option allows the cover to be continued on a personal basis without medical evidence being provided (subject to certain conditions). It is important for the Financial Broker to establish what these conditions are.

They may include, but are not limited to, the following:

- The option must be exercised within 30 days of leaving employment

- The option may only be available up to a certain age, e.g. before age 50

- The option relates to the lump sum death benefit only

- There may be an overall maximum amount of cover that can be converted to a personal policy.

Particularly if an individual on leaving does not have automatic cover with his new employment, this can be a valuable protection for the member leaving service and their dependants.

11.12 RetirementThe advantage of a member retiring at their normal retirement age is that it is a known event and can be planned for in advance. Ideally, if a scheme is being managed properly there would have been ongoing engagement with the member, but either way additional attention should be paid to scheme members when they are within five years of their normal retirement age.

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The first point to establish is whether they will continue to work until normal retirement age or whether there is an intention to retire either early or late.

(a) Early Retirement Having identified both the date that the member intends to retire at and the way in which the benefits can be taken it is important to ensure that the investment funds being used match the benefits that will be drawn down.

Early retirement is usually described as being subject to employer / trustee consent. In practice, with a DC scheme, there is no real need for employer / trustee consent and an employee can usually simply leave as and when they wish and start to draw benefits. The earliest age at which benefits can be taken (other than on the grounds of ill health) is 50.

(b) Late Retirement If an employee wishes to retire beyond the normal retirement age, then this is primarily an issue for the employer to consider. There are a number of points to be taken into account:

- By allowing an employee to work beyond their normal retirement age, are they establishing a precedent for other employees?

- Is the intention to continue making pension contributions into the scheme on behalf of the member?

- Disability cover is normally not available beyond age 65.

- If life cover is to be provided beyond normal retirement age this will usually need to be underwritten.

11.13 Additional Voluntary ContributionsDepending on individual circumstances, there may be scope, or a need, to pay AVCs, even in the final years leading up to retirement.

- With the qualifying age for State Pension now at age 66 and with many employers still using age 65 as the ceasing age from employment, there will be a gap in an employee’s retirement income for one year. This will increase to two years in 2021 when the qualifying age goes to 67 and three years in 2028 when the qualifying age goes to 68. It remains to be seen whether employers will leave the ceasing age from employment at 65 or change it in some way to reflect the qualifying age of the State Pension.

- An individual’s personal financial circumstances may allow AVCs to be paid that were not feasible in the past.

- In some cases, individuals with small funds may have the opportunity of paying AVCs to ensure that, as a minimum, they can avail of the Revenue maximum retirement lump sum.

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New group pension business for a Financial Broker can arise in a number of ways:

- An employer with no existing pension provision decides to set up a new group pension scheme

- A Financial Broker pitches for and wins an existing group pension scheme.

12.1 New Scheme In Chapter 6 – Scheme Design, the various aspects that need to be considered when establishing a new scheme were covered in considerable detail. Having decided on the structure of the scheme, the next decision to be taken is where to place the business.

Typically, the Financial Broker will review the market on behalf of the employer and come up with either a specific recommendation or a short list of companies that will be considered.

12.2 Pricing The Financial Broker will need to decide / establish how they are to be remunerated, both in terms of setting up the scheme and also for servicing it on an ongoing basis. Remuneration can either be by way of a fee paid by the employer or by a commission payment from the insurance company. The commission will be built into the allocation rate for the scheme and effectively means that the remuneration is paid for out of the contributions made by the employer and members. The type of remuneration will be influenced by the employer’s approach to the pension scheme and / or the Financial Broker’s own style of operating. For members, a fee based structure is clearly the better option as it means that more of the contributions get invested in the pension scheme on their behalf. Against this, many employers will prefer the ‘control’ that a commission based structure provides in that the known cost is based on the level of pension contribution being paid on behalf of each member. For the Financial Broker, charging fees involves additional administration work, including issuing invoices and following up looking for payment. The advantage of a commission basis is that the commission will be paid automatically by the insurance company on receipt of the contributions to the scheme. Pricing a scheme can be difficult for a Financial Broker and the market is becoming extremely competitive. It is important to quote a level of remuneration that will secure the business but will also adequately reward the Financial Broker. For fee based business employers will look for a fixed fee and a clear picture of any additional fees that may arise. In some cases there may be a fixed fee for the administration with additional fees, charged at an agreed hourly rate, for other services such as member presentations / meetings etc. If the remuneration is to be on a commission basis then there are a range of alternatives available to the Financial Broker.

New Business

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For smaller sized schemes commission can be structured on a financed basis, providing members with a uniform high allocation rate and the Financial Broker with a combination of both initial and renewal commission. The ‘cost’ of the initial commission will be recouped through a higher management fee. Larger schemes tend not to be on a financed basis, with any commission being directly deducted from the allocation rate. There can be a combination of an initial and renewal commission or a flat commission from year one. Irrespective of the type and level of remuneration decided upon it is essential that the Financial Broker provides, and is seen to provide, a quality service for the charges that are incurred by the employer and / or scheme members.

12.3 Selecting an insurance companyIn deciding on the most suitable insurance company to act as registered administrator, a number of factors will be taken into account and these may vary depending on the particular circumstances of the employer and their requirements. Typically, the following will be some of the main factors that will be used to help decide on the selection: - Administration / service - Allocation rates and other charges - Range of investment funds - Quality of default investment strategy - Investment performance - Online facilities

12.4 Taking over existing schemes Where a decision has been taken to switch an existing scheme from one insurer / registered administrator to another, there are two approaches that can be taken: - Setting up a new legal arrangement / scheme

- Continuing to operate the existing legal arrangement. Each approach has its merits and the approach taken will again depend on the circumstances of the particular scheme. (1) Setting up a new legal arrangement / scheme If a decision is taken to set up a new scheme then the following steps need to be followed:

(a) Decide the date from which contributions will cease to be paid into the old scheme and will start to be paid into the new scheme.

(b) Completion of an employer proposal form and trust deed to establish the new scheme.

(c) Completion of employee application forms – in some cases it may be possible to use the membership data from the previous administrator.

(d) In any event members would need to select investment fund(s) for the new scheme.

(e) The pension scheme would then be submitted for Revenue approval and once this is received, it will be possible to transfer the assets from the old scheme.

(f) Before assets from the old scheme can be transferred, it is necessary to either meet the requirements of the ‘Bulk Transfer Regulations’ or, as is more often the case, arrange for each member of the new scheme to agree to the transfer of the assets. This consent form can be incorporated in the application / investment choice form mentioned in (c) and (d) above.

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(g) The old scheme is now made up of deferred members and the next step is to wind up the scheme and to transfer the deferred members into personal retirement bonds. The ability to wind up the old scheme and transfer deferred members into personal retirement bonds is one of the main advantages of establishing a new scheme. It provides an opportunity to ‘exit’ deferred members because as the old scheme is being wound up, the individuals concerned can be transferred to personal retirement bonds without the need for their consent.

Apart from the convenience of reducing the overall membership of the scheme, in many cases it may avoid or at least delay the scheme membership (active and deferred) going over 100 members, which requires audited accounts to be prepared.

In winding up the old scheme, it is important to note that if the members concerned cannot be contacted, then an advert advising of the winding up of the scheme and relevant contact details must be placed in a national newspaper.

(2) Continuing The Existing Legal EntityThe alternative approach to transferring a scheme is to continue with the existing legal entity, which involvesthe following:

(a) As the existing legal entity is maintained, there is no need for Revenue approval to be obtained.

(b) A deed of amendment is executed whereby a new insurance company is appointed as registeredadministrator and investment manager and the rules of the new insurance company are adopted by the scheme.

(c) An employer proposal form is also normally required.

(d) As it is the same existing legal entity, there is no need for member consent to be obtained, although it would be good practice to advise members of the changes that are taking place.

(e) Normally it will be necessary to arrange for members to agree on new investment fund(s) for the

scheme.

(f) The other key difference with this approach is that both active and deferred members would transfer to the new registered administrator. There is no ‘wind up’ of the old scheme.

Not having to obtain Revenue approval for a new scheme and the fact that member consent is not required may suit some employers. Against this there is no opportunity to ‘exit’ the deferred members as there is no scheme wind up involved.

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From time to time complaints from members may arise and these can be dealt with in a number of ways:

- Resolved informally.

- Through the internal dispute resolution ( IDR ) procedure that all schemes are required to have in place.

- Referred to the Pensions Ombudsman.

13.1 Internal Dispute Resolution (IDR) Under the Pensions Act 1990 (as amended), the trustees of a company pension scheme are required to have an internal disputes resolution (IDR) procedure in place to deal with certain complaints by actual or potential beneficiaries, and all members must be made aware that there is an IDR procedure in place. The complaint may be made against the current or previous trustees, the employer or anyone involved in the running of the scheme. The IDR procedure can only be used for a complaint “about an alleged financial loss caused by mal-administration, or a dispute of fact or law relating to the scheme” – these are the types of complaints that can be referred to the Pensions Ombudsman. A complaint can be made by: - A current scheme member

- A former member

- A surviving dependant or spouse of a deceased member

- The personal representatives of a deceased member

- Any person claiming to fall into any of the above categories

13.2 IDR Procedures Below is a summary of the main aspects of an IDR procedure:

- Firstly the complaint must be made in writing, setting out the details of the situation and attaching any supporting documentation.

Complaints

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- The trustees may request further information from the individual making the complaint to enable them to investigate it.

- The trustees may appoint an investigator to review the complaint if they consider this to be the best course of action.

- The investigator appointed must prepare a written report for the trustees within two months of being asked to examine the complaint.

- The trustees must make a decision on the issue.

- The trustees must notify the individual who made the complaint within three months of having received all the requested information from the individual.

The ‘notice of determination’ should include the following information: - A statement of what has been decided.

- Any relevant legislation, legal precedent, provision in the trust deed and rules, determination of the Pensions Authority or ruling or practice of the Revenue or any other material that was relied on in

making a decision.

- Where a discretionary power was exercised, a reference to the provision in the trust deed and rules conferring such discretion.

- A statement that the determination is not binding unless a person agrees to be bound by it.

- A statement that the matter may be one that can be investigated by the Pensions Ombudsman.

- The address of the Pensions Ombudsman.

13.3 IDR findings – options for complainant Following receipt of the IDR decision from the trustees, the complainant can either accept the decision in writing or refer the complaint to the Pensions Ombudsman.

13.4 Pensions Ombudsman The office of the Pensions Ombudsman was established following the commencement of the relevant sections of the Pensions Act on the 2nd of September 2003. It is a statutory and independent office that investigates and adjudicates on complaints and disputes concerning both company pension schemes and PRSAs.

As stated above the Pensions Ombudsman cannot take on a complaint or dispute unless it has first gone through the scheme’s own IDR procedure. Neither can it investigate a dispute which is:

- Subject to court proceedings

- Concerning social welfare pensions. The Pensions Ombudsman will rule on the complaint and either uphold it or dismiss it. The Pensions Authority also has the power to award financial redress to a successful complainant. As a last resort the complainant can appeal the decision of the Pensions Ombudsman to the High Court.

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Family law and PAOs by their very nature are complex. The notes below are not intended as a definitive guide toall the issues involved. The purpose is to raise awareness of this area for Financial Brokers, but in all casesappropriate independent legal advice should be obtained.

14.1 Pension Adjustment Order (PAO) In simple terms a PAO transfers the legal ownership of certain pension and / or death benefits to a member’s spouse, registered civil partner, qualified cohabitant or other dependant (e.g. a child). A PAO is legally enforceable and overrides the scheme rules, any trustee discretion that may apply and certain legislative restrictions. A PAO can only be established under: - The Family Law Act 1995 (Judicial Separation)

- The Family Law (Divorce) Act 1996

- The Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010

14.2 Implementation of a PAO The provisions of the 1995, 1996 and 2010 Acts clearly advocate that the preferred approach to be taken by the Court in settling marital / partnership disputes is to try to resolve the issues by adjusting other assets, and that only as a last resort will the pension benefits of either party be used. However, in view of the sizeable assets that could have built up in a company pension scheme, more and more PAOs are being applied for and granted. Initially, information will be requested via the trustees for details of the member’s pension benefits and while some of the information must be provided as a right to the member’s spouse, other specific information, e.g. the value of the pension fund, can only be provided with the member’s consent. To avoid legal costs for all parties it is strongly advised that the information being sought is offered on a voluntary basis.

14.3 Types of PAO There are a number of different types of Pension Adjustment Orders: - A Retirement Benefit Order

- A Contingent Benefit Order - A Nominal Value Order

Family Law and Pension Adjustment Orders (PAOs)

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(1) Retirement Benefit Order With a Retirement Benefit Order, a certain portion of the member’s retirement benefits are allocated for the benefit of the member’s spouse / partner – referred to as the non-member spouse. This is referred to as the designated benefit. The PAO must specify the “relevant period” (the period over which retirement benefits were built up) and the “relevant percentage” (proportion of the fund built up during the relevant period) to be allocated to the member’s spouse / partner. Once the designated benefit has been identified, the following options are available: Earmarking. Earmarking is where the member’s spouse / partner takes no action, which means that into the future, any decision taken by the member will have an impact on the member’s spouse / partner. Earmarking allows the member to decide on the investment choice for both their own and the spouse / partner’s pension fund and the member can also dictate the date on which benefits are drawn down (for both parties). This is the least satisfactory way of dealing with the designated benefit. Pension Splitting. This is where the designated benefit is taken from the member’s fund and can be transferred to either: - A separate account within the same pension scheme but in the name of the non-member spouse partner.

- Another pension scheme of which the non-member spouse / partner is a member.

- A personal retirement bond or a PRSA in the non-member spouse’s / partner’s name. It is possible for the trustees to transfer the designated benefit out of the scheme without the non-member spouse’s / partner’s consent provided a number of conditions are met, including ensuring that charges / fees and costs are reasonable. (2) Contingent Benefit Order A contingent benefit order refers to benefits payable under the pension scheme in the event of the death of the member. Contingent benefits cover any insured benefit, and also the value of the pension fund at the date of death. A contingent benefit order will specify that part or all of the member’s life assurance benefit is to be payable to the member’s spouse / partner (or for the benefit of a dependent child) in the event of the death of the member. Where a contingent benefit order is served on the trustees, it will override the normal trustee discretion that applies to the payment of lump sum death in service benefits. (3) Nominal Value Order It is not possible to have a PAO of no value. As a result, a practice has evolved of a nominal value PAO being made where the parties involved in the break-up agree not to seek a share of their respective scheme benefits. The nominal value PAO has no commercial benefit and generally consists of a very short period, e.g. one day, and a very small percentage, e.g. .001%, of the fund value. A key element of a nominal value PAO is the inclusion of a clause whereby it is agreed that the non-member spouse / partner cannot seek an amendment to the PAO at a later date.

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Group risk cover includes death in service benefits and disability cover.

The death in service benefit can pay a lump sum and / or a dependant’s pension on the death of a member. The disability benefit pays an income if a scheme member is unable to carry out their own occupation due to disability as a result of illness or injury. Death in service, particularly a lump sum death benefit, is frequently provided as part of an overall pension / benefit package. It is relatively inexpensive and will be one of the most cost effective and appreciated benefits that an employer can provide for employees.

Some schemes will also provide a dependant’s pension on death in service and / or disability cover but these benefits are not as commonly used as a lump sum death in service benefit, primarily due to the cost involved.Where risk benefits are being provided, they can either be included as part of the one overall scheme with an insurance company or can be set up on a stand-alone basis.

15.1 Legal Aspects Death in service benefits are classified as “relevant benefits” under the Taxes Consolidation Act 1997, and as such must be established under trust in the same way as a pension scheme. Disability cover does not form part of the trust and is a separate insurance contract arranged between an employer and an insurance company.

15.2 Arranging the CoverIt is important for a Financial Broker to weigh up the convenience of having all the benefits with one insurance company against the flexibility that providing cover under separate contracts gives you. The key factor in deciding whether to place the risk and pension benefits with one company or have them separate is down to cost. Group risk is essentially a commodity, with the underlying cost being the main factor in deciding where to place the cover.

Typically in small to medium sized schemes the risk benefits will be placed with the pension provider, primarily for convenience for the Financial Broker, employer and members. One particular advantage of grouping the benefits with one insurance company is that the annual benefit statements that the members receive will contain information on their entire benefit package.

In addition for smaller schemes the risk premium may, if arranged as a separate stand-alone contract, fall below the insurance company’s minimum premium requirements.

For medium to large sized schemes, the cost saving that may be achieved by arranging the risk benefits separately could outweigh the convenience of placing the benefits with one insurer.

Group Risk

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An important point to watch is the terms and conditions that will apply if the pension and risk benefits are grouped together. In some cases, the risk benefits may be conditional on the pension benefits continuing with a particular insurance company; therefore, if a decision is taken to move the pension benefits away from an insurer then the insurer may have the right to go off risk and stop providing the group risk benefits.

15.3 Advantages of Group Risk(1) CostGroup risk, particularly lump sum death in service, is a very cost effective way for an employer to provide benefits for their employees. It can be considerably less expensive to set up and administer than individual cover, particularly if there is a large number of employees. (2) Ease of Administration The group risk market has evolved over the years and, as a result, insurance companies continue to make their products more attractive. Their objective is to reduce, as far as possible, the administration work involved whilst at the same time ensuring that there is no selection against them.

15.4 Meeting the CostThere are a number of different ways in which the cost of risk cover can be met by an employer. (a) Recurring Single Premium (RSP)For small schemes (typically less than 20 members), RSP is the normal way in which the cost of the benefits are met. With this method, a premium is calculated for each individual based on gender, the level of cover required and their age next birthday. The premium is sufficient to maintain the cover for one year and at each subsequent renewal a revised premium will be calculated. New entrants and leavers need to be notified to the insurance company so that: - A proportionate premium can be calculated and charged up until the next renewal date for new entrants and / or

- A refund can be calculated in respect of any members who have left service. (b) Unit RateWhere there is a specified minimum number of members included for risk benefits, typically 15 to 25, it may be possible to have the costing for risk benefits on a unit rate basis. At its simplest, a unit rate is the average of the RSP rates added together. Normally a unit rate is guaranteed for two or three years. This is on the proviso that there is not a significant change in membership during that period (usually plus or minus 20%). Originally, when a unit rate was being calculated account was taken not just of the average of the premium rates in year one, but also in all the years of the unit rate period. It is now common practice to simply base the unit rate on the average of the premium rates in year one and as a result the unit rate should prove to be more competitive than RSP.

15.5 Factors That Influence Premium RatesEach insurance company will have their standard panel of rates and these will be adjusted for a particular scheme depending on a number of factors, including: - Mix of male / female lives.

- The occupations of the employees and the nature of the employer’s business.

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- The claims history: typically claims that have occurred in the previous five years will be taken into account.

- Foreign travel: most insurers will have a list of approved countries that employees can travel to on business and this is typically the EU, America, Canada, Australia, New Zealand and some of the Nordic countries. If business travel is to be undertaken outside these countries, then this will be taken into account when calculating the premiums.

15.6 Non Medical LimitThe non medical or free cover limit is another attractive element of group risk. While always subject to an insurance company’s discretion, a non medical limit will typically be granted on a group scheme provided a number of conditions are met. As a result the number of proposal (medical) forms that may otherwise need to be completed by individual members can either be reduced or eliminated. The following would be typical of the required conditions: - A minimum of ten lives for a new scheme.

- The cover must be provided for either all employees of the company or all employees within a clearly defined category within the company, e.g. management, clerical workers etc.

- All employees to be covered by the scheme must be actively at work or capable of being actively at work on the date that cover is put in place and will not have been absent for more than ten days in the preceding three months.

- The cover being provided must be uniform, e.g. the same multiple of salary for all employees or all employees within the defined category. Subject to the conditions above being met, all employees whose benefit falls below the non medical limit, as calculated by the insurer, will be accepted at ordinary rates without any proposal (medical) forms being completed. Where an individual’s benefit is in excess of the non medical limit, cover would be automatically provided up to this limit and it is only the additional or excess benefit that will need to be underwritten. As a result, frequently a scheme will have a sufficiently high free cover / non medical limit so that no employees will need to be underwritten for life assurance cover. In the case of disability cover, for the same scheme, it is likely that a small number of senior employees may have to have their benefits in excess of the non medical / free cover limit underwritten. Each insurance company will have their own formula for calculating non medical limits. An indicative non medical limit for death in service cover would be: (a) Twice the average of the scheme benefits plus (b) 10% of the total value of death benefits. In the case of disability cover, the non medical / free cover limit would be lower and typically this would be the average disability benefit + 5% of the total value of disability benefits. All insurers will also have a maximum non medical / free cover limit and depending on the insurer this will vary between €1.5 and €3 million for death in service benefits and between €100,000 and €350,000 for disability / premium protection.

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Example – Non Medical / Free Cover LimitsNumber in Scheme 50

Benefits to be provided:

Lump sum death benefit 4 times salary

Disability benefit 2/3rds of salary less State Disability Benefit (single person)

Deferred Period 26 weeks

Escalation 3%

Premium protection N / A

Ceasing age 65

Salary Roll €1.75 million

Total sums assured €7 million (Life Cover) / €677,867 p.a. (Disability Benefit)

Calculation of Non Medical Limits (1) Life Cover

Average Benefit (€7,000,000 ÷ 50) €140,000

Twice Average Benefit €280, 000

Add 10% of total sum assured €700, 000

Non Medical Limit €980, 000

(2) Disability Cover

Average Benefit (€677,867 ÷ 50) €13,557

Add 5% of total benefit €33,893

Non Medical Limit €47,450 p.a.

In this example all members were under the non medical limit for both death in service and disability and were actively at work, so no underwriting was required. Example – Premium Rates Factors which influenced the premium rates for this quotation - Clerical Occupations - 50 / 50 male / female split - No claims in the last 5 years - Ages – average age 35

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Unit Rates calculated

Benefit Unit Rate 1st Year Cost

Life Cover 0.041% €2,870

Disability 0.987% €6,690

Notes- The unit rates quoted include a continuation option. The cost can be reduced by 2.5% if this option is

removed.

- The benefits are based on salary at the previous renewal date. It is possible to have benefits based on

the salary at the date of claim; this would add 2.5% to the above costs.

- Premiums are assumed to be paid yearly. If paid more frequently then instalment loading will be added.

- The unit rate includes commission of 6% (life), 12.5% (disability).

NB: This quote is fairly typical – apart from the fact that there was no premium protection. It is fairly indicative of the relative cost of life cover and disability and as can be seen, for the benefits being quoted the cost of disability is more than twice that of the lump sum death benefit.

15.7 Underwriting of benefitsIn a small number of cases, medical evidence may be required and this could arise for a number of reasons including: - A non medical/free cover limit does not apply to the scheme

- A member’s benefit exceeds the non medical limit

- A member does not meet the ‘actively at work’ requirements

- A member does not join the scheme at their first opportunity.* * This is a recurring problem in schemes and underlines the need for Financial Brokers to clearly understand when employees should be included for risk benefits and to ensure they are included when they first become eligible.

15.8 Types of UnderwritingInsurers have improved their procedures for dealing with underwriting in recent years with a view to ensuring that if cover needs to be underwritten it is processed as quickly as possible and the appropriate cover is put in place. Depending on the particular circumstances of a scheme and the insurance company involved this could include: - Completion of an application form

- Nurse tele-interview*

- Report from the employee’s own doctor ( PMAR )

- Independent medical examination

- Nurse medical screening.* * These are recent initiatives from some insurers to try to suit the employee as far as possible. In the case of the nurse tele-interview, a specialist nurse will ring the employee at a prearranged time that suits them to ask the necessary questions. In the case of a nurse medical screening, this is carried out by a

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specialist nurse instead of an independent medical. One of the key advantages of this is that the nurse will visit the employee at a time and place that suits them rather than the employee having to attend a doctor’s surgery.

15.9 Underwriting TermsOnce the medical evidence has been evaluated, the underwriters will decide whether cover can be provided and if so on what terms. The following are the possible outcomes: (1) Ordinary rates of premiums (2) Ordinary rates but with an exclusion for a specific medical condition and / or a hazardous pursuit (3) Postponement: this is likely where an individual is undergoing particular treatmen / investigation and a decision needs to be deferred until the outcome of this treatment / investigation (4) Decline (5) Some insurance companies will still apply a medical loading where the risk is above normal. This involves the payment of an additional premium e.g. + 50%, + 100%. Other companies are now moving to a position where medical loadings will not be applied (apart from where a scheme is taken over from another company and there are existing medical loadings – these normally will be maintained). Another welcome move in the group risk market is the application of ‘forward underwriting’. The terms will vary between insurance companies but typically where an individual has been underwritten, future increases within certain limits will be provided without further medical evidence being required.

15.10 Multi National PoolingThe objective of multi national pooling is to ‘pool’ or combine the claims experience of a company’s insurance arrangements across a number of different countries.

There are a number of pooling networks that specialise in this area and target companies who operate in a number of different countries. The pooling network will in turn have a local insurer in each country that will provide the insurance cover for the subsidiary employer who is operating there.

The objective of multi national pooling is that by combining the group risk of the multi national employer across a number of countries, a favourable claims experience will evolve and this in turn will lead to a rebate or profit sharing back to the employer. Depending on the employer involved, this profit sharing or rebate could be retained by the multi national employer or could be distributed locally.

15.11 Group Risk QuotationsFor Financial Brokers group risk and in particular death in service / life assurance cover is a key benefit that should be raised and discussed with employers, both existing clients and prospects.

The provision by an employer of a lump sum death benefit for their employees will be viewed as an extremely attractive benefit for the employees and may be a very low cost for the employer. Where the employer’s budget will allow, the provision of a dependants’ pension payable on death in service and / or a disability benefit payable where an employee is unable to work as a result of illness or injury should also be considered. Where an employer already has group risk cover in place, there is an opportunity for the Financial Broker to review the cover to see whether:

(1) The benefits being provided are fit for purpose

(2) The most competitive rates are being obtained.

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As a rule, the most important element in group risk is the premium rates being charged, although the availability of cover without medical underwriting, particularly for senior employees, can also be a significant determining factor. It is essential that all the necessary information required for an insurance company to provide a quote and to go on cover is obtained and provided.

Particular care is needed when cover is being transferred between underwriters to ensure that there is no gap in cover. If an employee is out on a disability claim then this claim will continue to be the responsibility of the existing insurance company. However, depending on the nature of the claim the individual may not be insurable for death in service benefits with the new insurer.

15.12 Voluntary Group RiskIt is also possible to have a group risk scheme, either death in service or disability cover, which operates on a voluntary basis and where the premiums are paid by the individual members. This is quite a specialised area and usually involves the sponsorship / promotion of the voluntary group by a trade union that sees the scheme as a benefit to its members. The advantages of a voluntary group risk scheme include: - Simplified underwriting

- A salary deduction facility

- A unit or average rate which typically will be guaranteed for a period of two to three years A crucial element in voluntary group risk schemes is the claims experience and the claims management, as this will have a significant and direct impact on the unit rate charged.

Usually the death in service benefit is set up under trust, which means that members can receive tax relief on the premium payment. Where the scheme is established under trust, the maximum lump sum death benefit is four times salary, which will include any other trust based life cover that is in place for the particular members. Disability insurance is also normally set up as a Revenue approved arrangement, whereby members will get tax relief on premium payments but will also pay income tax on any benefit paid under the scheme.

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As part of a Revenue approved scheme, it is possible to provide life cover for employees whereby:

- A lump sum of up to four times salary can be provided

- A separate dependant’s death in service pension benefit can be provided

- The employer can pay for the cost of the cover and offset the cost against corporation tax

- There is no BIK liability on the employees.

Group life assurance is a very attractive benefit for both employers and employees. From an employer’sperspective, the cost is relatively inexpensive. For many employees (and their families), apart from any mortgageprotection cover they may have, in many cases it is the only personal life cover that is in place.

16.1 Type of benefits Life assurance cover can be provided in the form of a lump sum death in service benefit and/or a pension payable to a spouse, civil partner or dependant. The maximum benefits that can be provided are: A. A lump sum death in service benefit of up to four times salary

B. A dependant’s death in service pension can be provided of up to two-thirds an employee’s salary. Escalation can be provided on this pension and this typically will be at the rate of 3% or 5% per annum compound.

Following the introduction of legislation in 2011, it is necessary for same sex partners in a formal civil partnership to be treated in the same way as married couples. In terms of life cover, this means that if a higher level of cover is provided under the scheme for married members, then this higher cover needs to be provided for registered civil partners. A different level of cover can either be in the form of a higher lump sum death in service benefit e.g. four times salary for married members and twice for single members, or it could be in the provision of a specific spouses’ / dependants’ pension for married or civil partnered members.

16.2 Payment of benefits(a) Lump Sum. In the event of a claim, the maximum lump sum death in service benefit that Revenue allows is:

- Four times a person’s final remuneration, plus

Disability CoverGroup Life Assurance

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- The value of any personal contributions including additional voluntary contributions that have been paid into the pension plan.

The rules of the scheme will list the potential beneficiaries to whom the lump sum benefit can be paid, but within this list it is the trustees who must decide to whom the benefit will be paid, in whole or in part. The following is a sample of the list of possible recipients that the trustees can consider paying the lump sum benefit to: (a) The deceased member’s estate (b) A person with an interest in the deceased’s estate (c) The spouse or civil partner of the member (d) Children of the member (e) Other blood relatives (f) Adopted and step relatives of the member (g) A person who, in the opinion of the trustees, was wholly or partly financially dependent on the member (h) Someone mentioned in a letter of wishes.

16.3 Letter of Wishes Members who are included for a lump sum death in service benefit, or who are members of a pension fund, should be encouraged to complete a nomination form / letter of wishes. The purpose of this is to indicate to the trustees to whom they would like the benefit to be paid in the event of their death. The form, although not binding on the trustees, provides a useful indication of the member’s wishes at the time the form was completed. When completed, members should be reminded to update their form as necessary in the light of any changing personal circumstances.

The lump sum death in service benefit is paid free of income and capital gains tax but may be subject to inheritance tax depending on whom the benefit is paid to, as normal inheritance tax rules apply.

(b) Pension. If there is a dependant’s death in service pension provided, then this will be paid to the nominated spouse / civil partner / dependant in the event of the member’s death. The pension is paid in the form of income and therefore the recipient will pay income tax and the USC levy on the amount received. If the person is a dependant, but not a legal spouse or civil partner, there may also be a CAT liability on the capital value of the pension to be paid. Reasonable sized pensions to support minor children where both parents are dead may be exempt from CAT (section 82(4) of the Capital Acquisitions Tax Consolidation Act, 2003).

16.4 Pension Adjustment Order (PAO)Where a pension adjustment order has been served on the trustees then this will determine to whom benefits (covered by the PAO) will be paid. This overrides the scheme rules and any trustee discretion.

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The purpose of disability cover is to provide an employee who is absent from work through illness or injury withan ongoing income. Disability cover is different from pension and life assurance benefits in that the benefits,conditions etc. are not governed by the trust deed. It is a separate contract between the employer and theinsurance company. It is also important to understand the differences between the risks involved in disabilitycover compared to those in life assurance.

With disability cover, whilst the objective is to provide an individual with an ongoing income when they are absentfrom work through illness or injury, the recovery of an individual and their return to work is a key element thatneeds to be factored in to both the pricing and also the ongoing administration of a disability claim.

17.1 Type of BenefitsGenerally, there are two elements involved in disability cover: - Member’s benefit, which is to provide an individual with the ongoing income - A premium protection element to maintain the member’s pension contributions (employer and employee) and the cost of their life assurance benefits if they are out on claim. AVCs are not normally included.

The member’s benefit is typically calculated as either two-thirds or 75% of their salary less the State Disability Benefit payable to a single person. The two-thirds or 75% limit is the maximum benefit allowed by insurance companies and is designed to ensure that an employee who is absent from work has a financial incentive to return to work. Other benefit structures can be provided, e.g.

- The maximum benefit could be calculated differently e.g. 50% or 60% of salary.

- In some cases, the reduction for the State Disability Benefit is twice (not just once) the single person’s State Disability Benefit.

17.2 Deferred PeriodThe deferred period is the number of weeks that the employee must be absent from work before payment of a claim commences. Ideally, a disability cover scheme should tie in with an employer’s sick pay arrangement (if any), where the disability scheme takes over from the sick pay arrangement at the point sick pay ceases. Typically employers will opt for a deferred period of 26 weeks (6 months) whilst a deferred period of 13 weeks (3 months), which is more expensive and 52 weeks (12 months), which is less expensive are also used.

Disability CoverDisability Cover

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17.3 EscalationIn the event of a claim, an escalation clause can be added to both the member’s benefit and premium protection, and this is designed to protect the purchasing power of both benefits. Historically, a 5% escalation was the most common but in view of the low inflation of the past number of years, a 3% escalation benefit is increasingly becoming the standard rate applied.

17.4 Disability ClaimsFor most employers, a claim under a group disability scheme will be a fairly rare occurrence and it is important for a Financial Broker to support both the employer and the employee in the claims process to ensure that the claim is processed in a timely fashion and that payments start at the appropriate time. The practice between insurance companies will vary, but usually the completed claim form should be submitted approximately eight to twelve weeks before the end of the deferred period. If claim forms are returned within this timescale, then some insurers will commence payment of the disability benefit on a provisional basis at the end of the deferred period, even where the claim has not been fully processed. On the other hand, if forms are submitted late then there can be a delay in the claim commencing. The following is a sample of what is needed to consider a disability benefit claim.

(1) Member - Completed claim form - Details of salary / earnings – e.g. P60 and / or recent payslips - Photo ID.

(2) Employer- Attendance record for the last three to four years - Detailed job description.

On receipt of the relevant information the claim will be underwritten and this may involve getting further information from the individual’s own doctor / specialist or requesting the individual to attend an independent medical examination.

17.5 Payment of BenefitsWhere a claim has been admitted, the payment – both the member’s benefit and the premium protection element – will be paid in the first instance to the employer. The employer should in turn pay the benefit to the employee and it will be subject to income tax, USC and PRSI.

The employer should continue to return the individual as a member of the scheme at each subsequent renewal date and remit the premium protection that they have received as part of the claim to the pension provider in the monthly returns.

17.6 Claims SupportFrom an insurer’s point of view, one of the key aspects of disability cover is the management of claims. Whilst the application of a maximum benefit of either two-thirds or 75% of salary (including the State Disability benefit) will ensure that there should be a financial incentive to work, an insurance company will also try to help the member through their illness with medical as well as financial support. This support can include:

- Regular contact both directly with the member and also through rehabilitation programmes for members seeking a return to their former lifestyle and work. - The payment of a proportionate benefit allowing an individual to return to work on a part-time basis before undertaking a full-time return. - Linked claim – if an individual, following a return to work, has a relapse within six months of their return then typically an insurance company will deem this to be a linked claim and will not impose a new deferred period.

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The operation and administration of company pension schemes in Ireland is governed by a number of pieces of legislation, the main ones being:

18.1 The Pensions Act 1990 The Pensions Act 1990 (as amended) is the main piece of pensions legislation governing company pension schemes and PRSAs in Ireland. In addition to company pension schemes, the Pensions Act also regulates PRSAs and trust based Retirement Annuity Contracts ( RACs ). The legislation provided for the establishment of the Pensions Board – now called the Pensions Authority and the Pensions Ombudsman.

18.2 Taxes Consolidation Act 1997This Act brought together a number of previous pieces of tax legislation. It is the Act that primarily governs the tax treatment of pension plans and benefits, and covers company pension schemes, personal pensions and PRSAs. The Act sets out the requirements that must be met for a company pension scheme to obtain Revenue approval. Changes to the Act are usually made each year in the Finance Act, reflecting changes announced in the annual Budget.

18.3 Family Law ActsFollowing the passing of the Family Law Act 1995 and the Family Law (Divorce) Act 1996, it is possible for pension assets (both retirement and life assurance benefits) to be divided between spouses following a judicial separation or divorce. These Acts cover the granting of pension adjustment orders (PAOs), which in turn are served on the trustees of company pension schemes. PAOs when served will override the scheme rules and any trustee discretion that may have applied.

18.4 Civil Partnership LegislationThe Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 covers the rights of civil partners and qualified cohabitants in a number of areas, including pension benefits.

As a result of this legislation, civil partners, i.e. same sex partners who have gone through the formal civil partnership process, must be treated (in pension terms) in the same way as a married couple. The Act also allows a qualified cohabitant to seek a PAO.

Family Law and PAOs can be quite complex and they have been dealt with in greater detail in Chapter 14. In all cases, it is important to ensure that appropriate legal advice is obtained.

18.5 Personal Insolvency Act 2012The Personal Insolvency Act became law at the end of 2012 and comprehensively reformed Ireland’s personal insolvency laws. Amongst its many provisions, it introduced three non judicial debt resolution

Disability CoverPension Legislation

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processes: the Debt Relief Notice (DRN), the Debt Settlement Arrangement (DSA) and the Personal Insolvency Arrangement (PIA). In relation to pension benefits, broadly speaking the legislation allows that where pension benefits can be drawn down within the following five years (bankruptcy) or 6.5 years (debt settlement and personal insolvency arrangements), then they can be included as part of the debt resolution process.

This is new legislation and it remains to be seen how it will work in practice and how the role of trustees – who are required to look after the best interests of the members – may have an impact on any proposed arrangements.

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19.1 The Pensions Authority (previously called The Pensions Board) The Pensions Authority is a statutory body set up under the Pensions Act 1990.

The Pensions Authority regulates company pension schemes, PRSAs and trust based retirement annuity contracts (RACs). Its mission is to support a substantial pension system that will provide adequate and reliable pensions for retired and older people and that achieves wide coverage. The objective is achieved by:

- Safeguarding the interests of pension scheme members through effective regulation.

- Providing relative information and guidance to both the general public and those involved with pensions.

- Providing policy advice and technical support to the Government.

The Pensions Authority in regulating the operation of company pension schemes will carry out regular audits to ensure that schemes are being run in a satisfactory manner and that the trustees are fulfilling their obligations to scheme members. The Pensions AuthorityVerschoyle House, 28-30 Lower Mount Street, Dublin 2 Tel: 01 6131900 Email: [email protected]

19.2 Pensions Ombudsman The role of the Pensions Ombudsman is to investigate complaints of financial loss due to mal-administration and dispute of facts or law in relation to company pension schemes, PRSAs and trust based RACs.

The Pensions Ombudsman will only consider complaints that have already gone through the pension scheme’s internal dispute resolution procedures.

The Pensions Ombudsman is completely independent in the performance of these functions as an impartial adjudicator. The stated aim of the Ombudsman is to resolve complaints practically, informally and quickly. There is no cost for using the services of the Ombudsman.

Pensions Ombudsman 36 Upper Mount Street, Dublin 2 Tel: 01 6471650 Email: [email protected]

Pension Regulatory Bodies

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19.3 Revenue Commissioners The Large Cases Division, Financial Services (Pensions) is the branch of the Revenue Commissioners that regulates the tax treatment of company pension schemes in Ireland. Through its Revenue Pensions Manual it sets out in detail the conditions that must be met in terms of the tax treatment of both contributions and benefits. All company pension schemes in Ireland must receive Revenue approval and in the absence of this approval a scheme cannot avail of the tax advantages that apply. Office of the Revenue CommissionersFinancial Services (Pensions) Large Cases Division Ballaugh House 73-79 Lower Mount Street Dublin 2 Tel: 01 6131800 Email: [email protected]

19.4 Financial Services Ombudsman The Financial Services Ombudsman is a statutory body that deals independently with unresolved complaints from consumers about their individual dealings with all financial service providers.

Financial Services Ombudsman3rd Floor, Lincoln House Lincoln Place Dublin 2 Tel: 01 6620899 Email: [email protected]

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A Guide to Group Pensions and Group Risk Benefits for Financial BrokersFinancial Broker


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A Guide to Post-Retirement Income Planning and Options


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