New European Investment Rules Likely To Cause Problems For Irish Pension Funds

by Jason Gorringe, for LawAndTax-News.com, London

13 April 2005

International consultancy firm, Watson Wyatt warned last week of the difficulties that pension funds in Ireland are likely to face in complying with the requirements of the European Union directive governing investment policy, set to come into force on September 23.

The aim of the directive is to bring uniformity of regulation of pension schemes within the EU, thereby increasing benefit security for scheme members.

As part of the directive, pension funds will be required to prepare and maintain a Statement of Investment Policy Principles (SIPP) which must include investment risk measures, risk management processes and the strategy of asset allocation.

Speaking on Friday, Paul Droop, senior consultant at Watson Wyatt in Dublin, observed that:

"This directive will have significant ramifications for funds in Ireland particularly from a governance perspective. Currently there are no prescriptive regulations beyond the requirement to provide for the proper investment of the resources of the fund in accordance with its own rules."

"The new directive is far more prescriptive and so the transition to full compliance, which is required by law, could require a significant investment of time, particularly for large complex funds. This is likely to be further complicated by the short time limit and the fact that associated regulations are still not yet available.”

The directive applies to funds with more than 100 active or deferred members, and will cover investment aspects such as diversification, investment in non-regulated markets, investment in the fund sponsor and the use of derivative instruments.

The legislation will also include provisions for the regulation of investment policy where pension funds are managed across national jurisdictions.

Recommended