In the years leading up to the transposition of the IORP II Directive (Directive) into Irish law, the investment rules in the Directive were something of a hot topic. The Directive makes numerous references to pension investing on the basis of Environment Social and Governance (ESG) factors. During the pre-transposition years, we experienced a rapidly growing awareness of the importance of socially responsible investing. The European Union (Occupational Pension Schemes) Regulations 2021 (Regulations) bring about a number of important, though well-anticipated changes to the investing landscape for trustees. The Pensions Authority’s (Authority) Draft Code of Practice for Trustees of Occupational Pension Schemes and Trust Retirement Annuity Contracts (Trust RACs) (Draft Code), as currently drafted, provides additional details on the practical aspects of the new investment rules.

Statement of Investment Process

The Draft Code provides that trustees must put in place a written statement (Statement) that covers the governance process for agreeing on and implementing investment objectives and strategy. The Statement must define the trustees’ investment objectives in quantitative and qualitative terms. As with many of the policy documents referred to in the Draft Code, the Statement must be reviewed once every three years, or where an amendment to the investment process has been agreed by the trustees. The requirement to prepare the Statement will be separate from trustees’ obligation to prepare a Statement of Investment Policy Principles. A list of specific considerations is also provided for both defined benefit (DB) and defined contribution (DC) schemes that must be included in the Statement and utilised when investment decisions are being made by the trustees.

Investment Objectives and Strategy

The Draft Code states that DB scheme trustees must specify in writing the quantitative targets for the scheme’s investment returns and risk tolerances. For DC schemes, these targets are to be defined separately for each investment choice available to members. It also provides that the investment strategy for each scheme type must be written in jargon-free English and the stated objectives must be “specific, quantifiable and verifiable”.

Implementation of the Objectives and Strategy

For DB schemes, implementation of the agreed investment objectives and strategy will be applicable to the scheme as a whole. However, for DC schemes, implementation will be separate for each investment choice available to members including the default investment strategy. The numbers of investment managers and mandates should be appropriate for the scheme’s size and complexity. Investment managers must be appointed on the basis of written criteria prepared in advance by the trustees. The criteria must include an acceptable level of investment manager fees for the scheme.

Investment Contracts

Unsurprisingly, the draft code states that there must be a written contract in place for every investment manager appointed and refers to the outsourcing agreement requirements located elsewhere in the Draft Code. A list of provisions that must be included in the investment manager contract is also provided for. The contract must not contain any provision which limits the trustees’ ability to obtain relevant information from the investment manager or a provision that impairs the trustee’s discretion to review and replace the investment manager.

Performance and Asset Safekeeping

Trustees must carry out regular performance reviews of investment managers which must be documented. Where an investment manager is retained, the trustees must also document the reasons for their retention. Where trustees choose to appoint a depositary for the safekeeping of assets, this appointment must be made by written contract. The performance of the depositary must be reviewed annually with a critical review carried out every three years. At this point, the services of the depositary must be compared with other depositaries in the marketplace.


The Draft Code is silent on the application of the Regulations investment rules to one member arrangements. This was an area that generated much concern amongst trustees and providers before the Regulations were published. There remains a good deal of uncertainty at present. However, the Authority has confirmed that it will issue a further information note that deals with the Regulations for one-member arrangements later in the year.