Pensions Authority reminder to trustees on investment strategy implementation for schemes under funding proposals
11 March 2020: As part of its move to a risk based and forward looking approach to supervision, the Authority reminds defined benefit scheme trustees of its expectations in relation to investment strategy implementation for schemes that have a funding proposal for a term longer than 3 years.
As part of their application to the Authority for specification of a later date under section 49(3B) of the Pensions Act 1990, the trustees’ proposed investment strategy is a significant consideration for the Authority. The proposed investment strategy should represent the trustees’ considered views and their intention for the investment of scheme assets over the term of the funding proposal period.
It is not acceptable for trustees to set out an investment strategy in their application and funding proposal if they intend to change or review the strategy in the short term. If trustees do not consider the strategy to be appropriate for the entire term of the funding proposal, or consider that a review of the strategy should be undertaken, such considerations should be completed prior to submitting the funding proposal application and within the statutory timelines.
Trustees are obliged to exercise their fiduciary responsibilities in the best interests of scheme members. If, at a future point, trustees consider the continued implementation of the investment strategy, as set out in their original application and funding proposal, is no longer in the best interests of scheme members, it is in order for the trustees to change that investment strategy.
Where trustees change the investment strategy during the term of a funding proposal, the Authority expects trustees to promptly notify and engage with it to explain the change. In the Authority’s view, such a change should be a relatively uncommon occurrence, involving material considerations which trustees should be in a position to justify to the Authority if required.
The Authority will monitor asset allocations and liability developments for relevant schemes by analysing Annual Actuarial Data Return submissions. The Authority is likely to engage with trustees where a material deviation or a lack of progress in the implementation of an investment strategy outlined in the original application is observed.
If the Authority considers that the changed strategy is not consistent with the requirements of the guidance governing funding proposals and/or is inappropriate, the Authority’s decision to grant an extended term for the funding period is likely to be reconsidered and may be rescinded. This would result in the early termination of the funding proposal. Should it transpire that such a scheme requires a funding proposal at a future point, the adherence or otherwise to the investment strategy is likely to be a relevant factor for the Authority when considering any future funding proposal and related applications.
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For further information, contact:
Technical Unit
The Pensions Authority
Tel: (01) 613 1900
Note to Editors
The Pensions Authority
The Pensions Authority is the statutory body established by the Pensions Act 1990 to regulate occupational pension schemes, trust based RACs and Personal Retirement Savings Accounts (PRSAs) and to advise the Minister for Employment Affairs and Social Protection on overall pension policy development. See www.pensionsauthority.ie