The transposition into domestic law of the EU Institutions for Occupational Retirement Provision (IORP) II directive imposed significant new obligations on pension scheme sponsors and trustees in the State.
The directive has transformed how occupational pension schemes are governed and supervised across Europe. Transposed into Irish law in 2021, it introduced far-reaching new requirements for trustees and sponsors, covering governance, risk management, transparency and sustainability.
Designed to better protect members and ensure long-term stability, IORP II has prompted a wave of consolidation in the Republic’s pensions landscape, with many smaller schemes migrating into larger, professionally managed master trusts to meet the directive’s enhanced standards.
The most profound impact of IORP II has been the substantial increase in governance and compliance requirements for pension schemes, says Grace Guy, head of master trusts and regulatory affairs at Mercer Ireland. “Key new obligations included appointing key function holders responsible for risk management and internal audit, introducing fit and proper standards for trustees, and enhancing member communications.”
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These heightened requirements have led to increased costs and compliance burdens, particularly for smaller stand-alone schemes and one-member arrangements, making it financially unsustainable for many to operate independently, says Guy. “Since IORP II’s enactment in Ireland in 2021, the number of pension schemes has declined markedly, with the Pensions Authority openly signalling that it expects this trend to continue.”
IORP II has affected different parts of the pension market in different ways, says Colm Power, financial planning director at Davy. “Some larger organisations have been able to retain their group schemes and meet the obligations of the directive. Many smaller organisations will struggle to comply, and the only alternative is for them to transition to a master trust.”
A master trust is a large, multiemployer pension scheme in which many unrelated employers participate under a single legal trust run by a professional trustee board.
Neville Maxwell, master trust sales manager at New Ireland, believes members benefit when their pension is easy to understand, well managed and designed to grow over time. He says many master trusts provide bespoke charge design, default investment options tailored to different life stages, and digital tools that help members stay engaged.
“These features can make a real difference to long-term outcomes. If your current scheme isn’t delivering on these fronts, it may be time to explore alternatives – and getting advice can help clarify what’s best for your employees.”
A master trust that provides access to personalised financial planning advice helps members to gain a clearer understanding of the trade-offs and actions most likely to help them achieve their retirement goals, says Power. “A dedicated adviser can work with scheme members to not only tailor the investment and retirement strategy of the scheme to their own unique needs but also provide personalised guidance to meet their wider retirement objectives.”
The key advantages for employers are cost and compliance, says Fiona Mullally, head of client services, employer solutions, at Irish Life. “Cost is one of the biggest advantages. The nature and size of a master trust mean the IORP II regulations can be met centrally within the master trust.
“So, by joining a master trust, employers are essentially placing the responsibility for delivering the new governance requirements with the master trust and its trustees. The scale and structure of master trusts mean employers can feel reassured their plan is in good hands and positioned to evolve over time.”
Governance is one of the most valuable aspects of a master trust, adds Maxwell. “Instead of relying on internal trustees who may lack the time or expertise, master trusts are overseen by professional trustee boards with deep pensions experience. This model helps reduce risk for employers and ensures consistent compliance with regulations. It also provides independent oversight of administration, investments, and member communications, which builds trust and transparency.”
Consolidation is reshaping the pension system in the State, and the move to master trusts is following the path taken by more mature defined contribution systems such as those in the UK, Australia and the Netherlands, says Guy.
“Managing small, separate pension plans is becoming increasingly difficult due to growing regulatory and governance requirements. This challenge is especially significant for medium-sized employers, who often find the costs and administrative burden too high.”
As a result, Guy says, master trusts are becoming a popular choice, offering greater scale, expert management, and simpler administration. “Master trusts have grown to manage over half of assets in the Irish defined contribution market, and this trend is expected to continue into the future.”
