We’ve all been there. We decide to take on a DIY project at home because “it’s a simple job, 10 minutes max”. And then 4 hours later as you call the expert to fix the additional problems (plus the original problem) you have created, you ask yourself “why didn’t I just do this in the first place”!

It’s the unintended consequence of you believing that you have greater DIY skills than you actually have.

The same issue can occur when Legislation is being drafted, especially if that legislation is focused on one specific area rather than an issue as a whole.

There have been many changes to pensions legislation in Ireland over the last number of years with the most recent being the implementation of IORP II regulations. One of the principal ideas behind the legislation is to tighten up significantly the area of trusteeship. Ireland is an outlier when it comes to pension trusteeship insofar as we have tens of thousands of pension trusts in force at the moment, the majority of them being one person arrangements.

Pension trusts in some European countries number in single digits as a Master Trust model is much more prevalent. A Master Trust provides trustee services to large numbers of pensions rather than one trust per pension as is the case in Ireland.

With the introduction of IORPS II, trustees now face much more onerous reporting requirements on their pensions with a significant increase in costs as a result. For some very large pension schemes, it may be possible to absorb these costs but for most pension schemes, moving the pension into a Master Trust will be the only solution.

This change will have no impact on the individual employees, and it will lead to stronger governance of the existing pension market.

However, this new legislation has created one unintended consequence in the area of Pension Adjustment Orders or PAOs.

A PAO is a court order which directs the trustees of a pension scheme to provide for benefits to be paid to a former spouse or civil partner in the event of a legal separation/divorce. Sometimes, the order relates to the value of the pension accumulated and other times it relates to other benefits provided by the pension – namely death in service benefits. The PAO could stipulate that the benefit is paid to the ex-spouse/civil partner in the event of the death of the pension member.

The PAO is served on the trustees of the pension scheme, and they must adhere to its ruling.

However, with the implementation of the new IORP II legislation expected to lead to most pension schemes moving to Master Trusts and therefore new trustees, there have been indications that the new trustees will not be in a position to administer these PAO’s as the PAO’s were served on the old trustees.

This is obviously an issue for the beneficiaries of these PAO’s and they are in limbo at the moment.

The Law Society of Ireland has raised this issue with the Pensions Authority, and they are pushing for a solution to be implemented as soon as possible before an event occurs that tests this unintended consequence of a pension moving to a Master Trust.

While this is a concern for those beneficiaries of PAO’s, the IORPS II legislation was not introduced to create this problem and so one would have to assume that a resolution to this problem will be introduced sooner rather than later.

As an aside, whilst the Law Society is correct to raise the unintended consequence of the new legislation, a PAO was never a rock-solid agreement in the first place. It could be voided by both parties if certain events occurred. A PAO ceases if the beneficiary of the PAO remarries. It also ceases if the person upon whom the PAO is served were to leave the employment that the PAO relates to.

If you have any questions in relation to the above, we would be delighted to answer them for you.

JDM Insurance Services.
https://www.jdminsurance.ie/

Anti-money laundering directives require each European Union (EU) Member State to establish a Central Register of Beneficial Ownership of Trusts (CRBOT).

The purpose of the CRBOT is to help prevent money laundering and terrorist financing by improving transparency on who ultimately owns and controls Irish trusts.

The terminology used in anti-money laundering to refer to persons who are obliged to implement measures under the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 is designated persons. This term includes auditors and external accountants.

A designated person is required under section 35 (3A) of the 2010 Act to ascertain that a trust’s beneficial ownership details are entered in the trust’s beneficial ownership register or in the CRBOT, prior to the establishment of a business relationship with that trust.

A designated person can gain access to a trust’s registration by obtaining an access number from the trustee.

Designated Persons have an obligation to notify the Registrar of the CRBOT where there is a discrepancy between the particulars of a trust’s internal register and the CRBOT.

A detailed guide on accessing the register and the discrepancy notice form can be found on the CRBOT website here.

A designated person who fails to notify the Registrar of a discrepancy commits an offence and shall be liable, on summary conviction, to a class A fine.