Irish pension funds have been warned of the “war for talent” in the sector amid new regulations, such as the IORP II Directive, that require increased risk management.

Speaking at the Irish Pensions Authority’s Risk Management Conference earlier this month, Central Bank of Ireland head of insurance supervision Tim O’Hanrahan, said those working in pensions will need additional training to meet the new risk management requirements facing Irish pension funds.

“The big question is where are you going to get it, when there are thousands of funds looking for that support, there’s a limited number of professional services firms, and a limited number of professionals. We hear in the insurance industry that there’s a massive war for talent. You may have all these aspirations to get these people, to get these resources, to get consultants but will the consultants be able to deliver what they say to you as trustees, do they have the resources to do that.”

However, he stressed that lessons could be learnt from other sectors, such as insurance and banking, as they have faced comparable requirements from directives similar to IORP II, such as Solvency II.

“What is happening to you in the pensions industry has happened elsewhere, and you can learn from elsewhere. Risk management is not a panacea for all your problems but using risk management as a tool can make you avoid the pitfalls that happen to companies and to pension funds,” he stated.

In regard to the challenges specifically facing the pension sector, O’Hanrahan said there are 85,000 pension funds in Ireland, many of which are very small. Therefore, “big structural changes” are happening in the Irish pensions markets, as the Pensions Authority has set out its plans for consolidation to drastically reduce the number of pension funds.

“There is a massive movement in the pensions industry at the moment in relation to master trusts,” he said. Assets in these funds have increased from €2.69bn in Q1 2022 to €13.91bn in Q2 2023.

“The next area is in bulk annuities, we’re hearing in the UK there is significant movement, there’s still an awful lot of small defined benefit pension schemes, a large number who have assets of less than €50m, and when these risk management requirements come into place, what is the answer for these pension funds. I know there are no easy answers, there’s questions as to legal convenance, there’s questions as to surplus and deficit but ultimately does it makes sense to manage such small pension schemes independently?” he asked.

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