Common EU Provisions Cease
At present there are EU wide provisions in respect of Institutions for Occupation Retirement Provisions; broadly speaking pension fund vehicles and entities. In the event of a hard Brexit, EU rules for IORPs will cease to apply to the United Kingdom. IORPs registered or authorised in the United Kingdom will not benefit from registration or authorisation under EU directives to provide services in the EU and will be treated as third country providers.
UK IORPs will no longer be allowed to operate on the basis of their UK authorisation / registration and authorisation for members / beneficiaries whose relationship with the sponsoring undertaking is governed by the social and labour laws relating to the occupational pension schemes of the remaining EU states. Their assets will be in the United Kingdom, and members and beneficiaries will be unable to rely on EU national law to protect and have access to them.
After Brexit IORPs registered authorised in the United Kingdom must comply in relation to activities relating to remaining EU member states and beneficiaries with the rules of the host state applicable to the activities concerned as in respect of those authorised in a third country. This may require registration with or authorisation by the competent authority of the host state.
UK IORPs may decide to transfer their portfolio in respect of remaining EU states and beneficiaries to an IORPs registered or authorised in an EU state in order to keep such members and beneficiaries within the EORPs the framework. A directive is due to take effect in January 2019 to facilitate transfers
Issues for Employers
Sponsoring undertakings that pay contributions to an IORPs registered or authorised in the United Kingdom should assess the conditions for the continuation of the scheme on the basis of the national law of the state in which they are established. The pension schemes will no longer benefit from the EU legal framework. If the host state does not allow continued cross-border activities, the UK IORPs sponsoring undertakings may be obliged to ensure that the IORP is either transferred or they find an alternative IORP.
Sponsoring undertakings established in the United Kingdom may pay contributions to an IORPs registered or authorised in the EU 27with regard to pension scheme members / beneficiaries whose relationship with the sponsoring undertaking is governed by the social and labour law of the remaining EU state, will be able to continue to do so subject to the EU legislation.
The loss of EU authorisation may affect the ability of IORPs registered or authorised in the United Kingdom to continue performing certain obligations and activities. They may need to take steps to ensure continuity of contractual arrangements in some cases. There are obligations to notify pension beneficiaries of information within a reasonable time which may include matters necessarily arising out of Brexit or the response to it.
Reciprocal Issues Ireland
The same issues that arise for UK pension vehicles in the European Union, prospectively apply to Irish pension vehicles that operate in the United Kingdom. EU authorised IORPs may no longer be in a position to operate in United Kingdom on the basis of their Irish authorisation. They may need to re-register with UK authorities or make other arrangements.
Sponsoring undertakings in Ireland that pay contributions to a UK authorised IORPs must assess the revised position. UK domiciled schemes will no longer benefit from the EU framework. Irish-based sponsors/employers need to assess whether this has material impact on their pension scheme and the terms of their pension promises to employees.