The Irish Pensions Authority has published its Annual Report and Accounts for 2021, detailing its regulatory activity and financial position.

It highlighted that the most important supervisory event of 2021 was the transposition of the IORP II Directive into Irish law, with the authority noting that it had therefore been required to implement more comprehensive, challenging and intrusive oversight.

Furthermore, IORP II and other new obligations had increased the complexity of the authority’s work and resulted in a “considerable increase” in costs in recent years, mainly due to increased staffing and IT costs.

The authority’s net cash outflow from operating activities increased from €633,192 in 2020 to €1.13m in 2021, with net funds decreasing by €1.25m to €5.9m during that period.

Its net assets after retirement benefits fell from €8.17m in 2020 to €6.63m in 2021.

The Minister for Social Protection, with the consent of the Minister for Public Expenditure and Reform, has approved an increase in authority fees for occupational pension schemes, with effect from 1 January 2022.

The authority stated that further increases will be needed in the coming years to meet costs and sustain prudent financial reserves, and it will develop a long-term financing strategy that will form the basis for future fee submissions to the Minister for Social Protection during 2022.

Its report also disclosed the regulatory activities undertaken by the authority in 2021, with 6 prosecution cases being concluded.

It opened 15 new investigations into various breaches of the Pensions Act, 1990, while 24 investigations were finalised and closed during the year.

The authority held seven onsite inspections of Markets in Financial Instruments Directive firms that were suspected of using third-party/parallel contracts that are prohibited by the act and completed one desk-based audit of an administrator due to a delay in issuing pension documents to members.

The report revealed that 494 of 553 defined benefit (DB) schemes satisfied the funding standard, as at 31 December 2021, with all except four of the remaining 59 schemes having funding proposals, or being in the process of submitting funding proposals.

Five funding proposals for DB schemes were approved in 2021.

The authority also received and dealt with 10,400 general pension and data processing queries during the year.

Commenting on the report and accounts, pensions regulator, Brendan Kennedy, said: “2022 is a time of considerable change and challenge for Irish pensions provision, because of the economic and market effects of the war in Ukraine and other international developments, and as a result of the ongoing implementation of the IORP II Directive.

“This has emphasised the need for informed, committed and systematic management of pensions savings. The recent economic shocks and the significant movements in stock markets and interest rates are a reminder of the challenges of investing for the long term.

“Pensions investment must take account of the near certainty of such disruption over the course of savers’ working lifetime and into retirement. Such investment must therefore specifically address issues of risk and liquidity, and not merely make simple assumptions about long-term outcomes.

“The management and oversight of investment and investment risk is an important part of trustee responsibilities and will be an important part of their own risk assessment, and of the Pensions Authority’s scheme-specific supervisory review process, both of which are obligations introduced as a consequence of IORP II.

“The objective of the transposition of the directive is improved consumer protection and better outcomes for members of Irish pension schemes. The specific intended outcomes are good value for money, appropriate investment and risk management and improved member communications.

“There is a strong appetite from trustees and pensions savers for implementing environmental, social and governance (ESG) factors in their retirement investment decisions, and it has been suggested that guidance from the Pensions Authority would be useful.

“The authority is well aware of the practical challenges: Although ESG is conceptually straightforward, its implementation depends on practical methodologies and reliable data. In either case, Irish pension funds are going to rely on international standards rather than setting their own specifications.

“The authority intends to consult with the pensions and investment industries as well as with appropriate national and international bodies with a view to issuing guidance in due course.”

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