EU’s IORP II Directive aims to improve governance and risk management systems across all pension schemes. In particular, it requires that trustees must now:
The Pensions Authority has set a deadline of the end of 2022 for schemes to fully comply with IORP II, including the new risk management requirements. This means trustees need to have appointed their risk management KFH and agreed their risk management policy and risk appetite statement by that date.
The timeline below sets out some of the key work streams in achieving full compliance. The most immediate step is for trustees to appoint their risk management KFH.
Trustee Due Diligence Requirements
Trustees must have detailed procedures for selecting and appointing their risk management KFH and must carry out due diligence to ensure their proposed risk management KFH meets the “Fit and Proper” requirements set out under the under the Pensions Authority Code of Practice.
IORP II is about building on the existing risk management systems that trustees already have in place but within a more formal risk management governance structure.
The risk management KFH is responsible for the scheme’s risk management function and advises the trustees on their risk management strategy, working with them to ensure it is executed effectively. The graphic below summarises the key elements of a scheme’s risk management system:
1. Risk governance structure
2. Risk documentation
3. Risk work streams
4. Wider scheme governance
Mercer has a long-established specialist risk management team in place to support trustees.
We have a deep heritage in risk management and a long history of helping trustees to manage the risks inherent in their pension schemes through our actuarial and investment advice, as well as liability and investment risk management projects.
Our specialist risk management team can guide you through the requirements of IORP II and help you develop an approach to risk management that meets your requirements and is proportionate for your scheme.
We’d be happy to set up a free consultation or send you more information to get you started. Simply fill out the form below and we will be in touch. If you are an existing Mercer plan member and have a question about your pension or shares, please contact the JustAsk team via this link.