There have been a number of recent announcements by the Pensions Authority that have implications for you and your customers. As you will be aware, in our last update of 7 July, we informed you of our decision to cease accepting new Executive Pension Plan (EPP) applications with immediate effect.
We now set out below a summary of the recent announcements with a particular focus on what this means for EPPs/One-member arrangements (OMAs) and Small Schemes (< 100 members).
Requirement to produce Annual Reports and Audited Accounts
Specifically, the Pensions Authority have extended the requirement to produce an Annual Report and Audited Account to allPension Schemes, irrespective of the scheme size or number of members.
This now includes EPPs/OMAs and Small Schemes (with 2 or more members). This is a significant additional requirement that had previously only been required for pension schemes with 100 or more members.
What is the effective date of these changes?
The first Annual Report and Audited Accounts are due for any EPPs/OMAs or Small Scheme that commenced on or after 22 April 2021 with a scheme year ending date on or after 31 July 2022.
What are the implications and options for customers?
As a result of these changes we want to make you aware of the following likely additional cost implications for your customers with EPPs/OMAs and Small Schemes.
For those that were established on or after 22 April 2021 or where an Application is still in the pipeline awaiting issue, there are two likely options:
Continue with existing arrangement and accept additional ongoing costs - There will be material additional costs for these customers incurred in the production of the Annual Report and Audited Accounts (and full compliance with the IORPS II requirements). These costs are still to be determined but would need to be paid for by deduction from the Policy on an annual basis.
Wind-up and Transfer - Alternatively, your customers may decide that they do not wish to incur the additional costs for the production of the Annual Report and Audited Accounts (and full compliance with the IORPS II requirements). In this case your customer’s EPP will need to be wound up at a future date and transferred to an alternative arrangement so as to avoid these costs on an ongoing basis. However, you should note that this requirement for an Annual Report and Audited Accounts may even be required if the scheme is in place for part of a year and subsequently wound up.
For any existing EPPs/OMAs established on or before 21 April 2021, you should note that there are some transitional measures that will apply to these one-member arrangements during a 5-year derogation period (i.e. until 22 April 2026). Thereafter, these arrangements will also be required to produce Annual Reports and Audited Accounts (and also ensure full compliance with all the IORPS II requirements). Regular Contribution Increases, Single Contribution Top-ups and Transfers-In from other approved Pension Arrangements can continue as before to these pre-21 April 2021 policies– they are not subject to the new requirements until 22 April 2026.
What about EPP applications in Pipeline?
Given the implication of these changes to employers and plan members, we will shortly begin the process of contacting Financial Brokers who currently have EPP’s in the pipeline to discuss possible alternative solutions:
Continue with EPP application - In some instances, continuing with the setting up of the Executive Pension may be the selected approach. Where this is the case, we will require you to confirm in writing that your customer wishes to proceed with issuing the Policy. Your Broker Consultant will provide you with a declaration for you to complete to confirm that your customer wishes to proceed. We will ask for this to be returned by 2 September 2022.
Proceed with alterative arrangement – Customers may decide to proceed with an alternative pension arrangement, in these instances we will require a new application to be completed for the relevant chosen product.
Not Proceeding – Some customers may decide they currently do not wish to proceed with their application – if this is the case, please let us know as soon as possible.
If you have a query on any of the above points, please contact your sales support team or speak to your Zurich Broker Consultant. If you have cases within Pipeline, we will be in touch with you over the coming days to discuss the options above.
Head of Retail Distribution & Propositions
Zurich Life Assurance plc Zurich House, Frascati Road, Blackrock, Co. Dublin, Ireland. Telephone: 01 283 1301 Fax: 01 283 1578 Website: www.zurich.ie Zurich Life Assurance plc is regulated by the Central Bank of Ireland.