The introduction of the euro has a number of implications for Irish pension schemes, for employers who operate those schemes, for employees and for pensioners. From the beginning of 1999 and during the transition period up to January 1st, 2002, there will be a facility - but no obligation - to account for and provide pensions in euros.

For occupational pension schemes the decision to convert the administration of the plan to euros will, principally, be dictated by the employer's payroll policy. Trustees will need to confirm with the employer when it is intended that salaries/wages will be paid in euros.

The trustees of occupational schemes have legal obligations to ensure that members of such schemes are properly informed of their benefits and entitlements and that proper records are kept. Although it makes sense therefore to be guided by the employer, this is not the only consideration. In reality, it is probable that most schemes will not pay pension benefits in euros until 2002 when the currency will be available in note and coin form.

With regard to pensioners, a key factor will be communication of change. The euro is worth just under 79p and it is essential that pensioners realise that the pension they are about to receive will not be altered in value in the changeover to the new currency.

The introduction of the euro has significant implications for pension scheme investment.

Because a significant part of pension fund assets are normally held in the same currency as its liabilities, some 60 per cent of assets of Irish pension schemes are currently Irish based - in a mixture of cash, property, fixed interest and equities. With the euro replacing national currencies, this will present a challenge and an opportunity to the trustees and managers of pension fund assets to diversify the investment of those assets outside Ireland.

Approximately 10 Irish stocks dominate the Irish equity market, representing about 70 per cent of market capitalisation. However, the entirety of the Irish stock market would represent only about 2 per cent of the euro zone market. Many more stocks and sectors are now available for investment without any currency risk, although the speed of diversification away from Irish equities remains uncertain.

Trustees and managers will also have to consider the level of UK equities in the fund, as sterling investments will carry a continued currency risk. The euro also has implications for those providing services to Irish pension schemes, particularly pension fund managers. Up to now the market for Irish pension fund management has been dominated by Irish companies.

With the introduction of the euro, there will be an opportunity for new non-Irish managers to offer investment services to pension trustees.

Looking to the future, the euro brings the possibility of European-wide pension schemes. There is as yet no European legal provision permitting an employer to establish a pension scheme in one member-state and to allow all of its European employees to be members of that scheme. The EU Commission aims to make a European-wide scheme a reality, although the different tax and social welfare schemes across the EU are an obstacle.

Brian Buggy is head of pensions law group at Matheson Ormsby Prentice.