Single Member Schemes After IORP II - Part 2

In Part 1 of this series of blogs, we concluded that in spite of uncertainty with regards to detail, IORP II is likely to have consequences for one member arrangements. In this blog we will examine the changed world of investments.


Other than the broad principles set out in the Pensions Act and Revenue Pensions Manual, single member pension schemes always enjoyed a considerable amount of freedom with regards to their investment strategy. For single member occupational schemes this is likely to change under IORP II as article 19 provides for the IORP to be invested predominantly in regulated markets. In the Irish context, this means that min. 50% must be invested in securities which are traded (not just listed) on the main exchange.

Article 19 is one of the provisions which sits uneasily with the concept of a single member scheme; the legislator will have to bend the wording to arrive at the desired outcome. To begin with, article 19 regulates “Institutions” not the schemes themselves. We know however that the Pensions Authority’s view is restrictive; contrary to the wording the Authority has deemed it to apply not at IORP level, not at scheme level, but at member level.

When applied to one member arrangements, the restriction will have a detrimental impact on the ability to invest in the much-loved asset class of property.

Much guesswork has been offered with regards to the extent of the grandfathering arrangement which was promised by Government to exclude investments already made. None of this guesswork has been conclusive but there is little doubt that any allowable transition will be extremely difficult to administer. The obvious risk is that investors find themselves on the wrong side of the law, so the prudent solution is to be prepared. This can be done by divesting to bring the exposure below 50% or by making arrangements for a transfer to a pension vehicle which is not targeted by IORP II, such as a PRSA or a Buy Out Bond.


Article 19 also contains a rule which - in an Irish context anyway   spells out the end of the opportunity for one member arrangements to borrow. Grandfathering arrangements in the domestic legislation are likely to legitimize existing borrowing. This will no doubt ease the worry in relation to loans already drawn down.

There has been some speculation if gearing ‘for liquidity purposes’, which is allowed under the IORP regime, can be utilized to bring investment in property under the mark of 50% exposure. While the argument may be sound enough, it is unlikely to be entertained by the regulator.  Therefore, under IORP II gearing in one member arrangements will effectively be prohibited.

Again, as the IORP regime by the Irish legislator is understood not to apply to PRSAs or Buy Out Bonds it will continue to be possible to invest in property with the assistance of external finance through either of these vehicles.

Next time

The investment strategy for a single investor is obviously closely associated with the investor’s attitude to risk. Next time, we will see that IORP II when applied to single member schemes is likely to offer alternative solutions to well-known issues of planning, strategy and governance.


Tommy Nielsen
Head of ITC Legal






*Please note this content is the view of the author and not of Independent Trustee Company

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