On 13 April the Pensions (Amendment) Act 2002 was signed into law by the Irish President. The Act, which amends the Irish Pensions Act 1990 will come into operation by ministerial order on various dates commencing 1 June. The act will be 'fleshed-out' by detailed regulation in many instances. The main features can be summarised as follows:

Personal retirement savings accounts (PRSA)

- PRSAs are long-term savings vehicles for retirement provision. They are intended, in similar fashion to UK stakeholder pensions, to increase the level of Irish private pension coverage.

A PRSA benefit is determined by the contributions paid by and on behalf of the contributor and the investment return on those contributions. PRSA products must be jointly approved by the Irish Pensions Board and the Irish Revenue Commissioners.

- It is envisaged that PRSAs will be provided by authorised life offices, banks or investment business firms. Entities which are not already authorised, such as supermarket chains, would be required to obtain authorisation from the appropriate regulator before they could act as a PRSA provider.

- An employer who is not operating an occupational pension scheme or whose scheme limits membership eligibility or imposes a waiting period (in excess of six months) is obliged to provide access to at least one standard PRSA for employees. Employers with pension schemes need to review their scheme documents to check if they limit access to an extent that requires them to make available a PRSA facility.

- The Act also prescribes the taxation treatment applicable to PRSAs. The treatment is similar to that afforded to occupational pension schemes and retirement annuity contracts. Contribution limits for individual contributors have been made slightly more generous to provide an incentive to utilise PRSAs.

Pensions ombudsman

The Act provides for the establishment of the office of an Irish pensions ombudsman. The legislative provisions have been modelled, to a significant extent, on the corresponding UK legislation. The Pensions Ombudsman has power to investigate and determine:

- A complaint made by or on behalf of an "actual or potential beneficiary" of an occupational pensions scheme or PRSA who alleges he has sustained financial loss occasioned by an act of maladministration done by or on behalf of a "person responsible for the management of" the scheme or PRSA.

- Any dispute of fact or law that arises in relation to an act done by or on behalf of a person responsible for the management of a scheme or PRSA and that is referred to the ombudsman by or on behalf of an actual or potential beneficiary.

A 'person responsible for the management of' a scheme or PRSA includes not only trustees, but also employers and former employers to whom the scheme relates. The ombudsman will have power to obtain information from such persons and in such manner as he thinks fit.

A significant feature of the ombudsman's jurisdiction is that they will be able to consider matters that arose up to six years before the office was created. The Act requires that schemes and PRSA providers have internal dispute resolution (IDR) procedures in place. The ombudsman shall not investigate or determine a complaint or dispute unless the IDR procedures have been resorted to and exhausted.

Vesting and preservation of benefits

- Employees leaving service after 1 June, 2002 need two years scheme service, rather than the five years previously needed, so that benefits are preserved.

- Preservation was introduced by the Pensions Act 1990 and applied only to benefits accruing after 1 January, 1991. The new Act has changed this so that preservation will apply to all benefits accruing under a pension scheme whether prior to or after
1 January, 1991. This change will take effect in respect of members who leave service on or after 1 June, 2002.

- Preserved benefits can be left in the scheme or may be transferred to another scheme, a buy-out bond or to a PRSA.

Remittance of contributions

The Act obliges employers who deduct pension contributions from wages of employees to remit those contributions to the trustees of the relevant scheme within 21 days of the end of the month in which the deduction is made. Employer contributions to defined contribution schemes must also be remitted within the same timescale. Trustees of schemes are obliged to ensure that the contributions are properly invested in accordance with the rules of the scheme within 10 days of the date by which those contributions should have been remitted by the employer.

Selection of investment by members

The Act gives trustees of defined contribution schemes a statutory exemption from liability for poor investment returns in cases where employees nominate the investment vehicle. Where trustees comply with requirements set down in the Act, they will be exempt from liability for the consequences of the members' investment decisions.

Further obligations on trustees

New obligations are imposed in relation to certain schemes in the case of bulk transfers and on winding up. The provisions require disclosure and consultation with members in stated circumstances.

Brian Buggy is head of the Matheson Ormsby Prentice pensions & employee benefits group.