Pension Scheme Arrangements (“PSAs”) are exempt from the EMIR clearing obligation until 16 August 2017. This follows the entry into force, on 16 September 2015, of Commission Delegated Regulation (EU) 2015/1515 amending EMIR as regards the extension of the transitional periods related to PSAs. 

As outlined in our previous briefings, while EMIR requires standardised over-thecounter (“OTC”) derivatives to be cleared through central counterparties (“CCPs”), PSAs initially benefited from a three-year exemption from this requirement due to concerns about the impact it could have on retirement income. While PSAs participate actively in the OTC derivatives market they generally have minimal cash positions, preferring to hold higher yielding but less liquid investments such as government bonds. Subjecting PSAs to the clearing obligation would effectively force them to hold more cash reserves, ultimately reducing retirement income.

It was expected that the three year exemption would provide CCPs with sufficient time to develop technical solutions to enable PSAs to satisfy CCPs’ variation margin requirements by the transfer of non-cash collateral. However, the necessary efforts to develop such solutions were not made, and concerns remained abut the impact of the EMIR clearing obligation on PSAs. briefing Consequently, in February 2015, the European Commission indicated that it would propose a Delegated Act to extend the exemption for PSAs from the central clearing obligation. On 5 June 2015 it published a draft delegated regulation extending the exemption for PSAs for a further two years. This delegated regulation was subsequently published in the European Union’s Official Journal on 15 September 2015.

While the current proposal is to extend the exemption by a further two-year period, it is noteworthy that the Commission has the power to extend the period by a further one-year period should the need arise.