The European Insurance and Occupational Pensions Authority (EIOPA) on the 15 February 2012 published its final response to the European Commission’s Call for Advice on the review of Directive 2003/41/EC of the European Parliament and of the Council of 3rd June 2003 on the activities and supervision of institutions for occupational retirement provision (IORP Directive).
A key proposal of EIOPA is the “holistic balance sheet”, as a way to achieve the Commission’s aim for harmonisation. It will enable IORPs to take into account the various adjustment mechanisms (conditional indexation, reduction of accrued rights) and security mechanisms (regulatory own funds, sponsor support, pension protection funds) in an explicit way. In other words, the approach proposed by EIOPA is to acknowledge the existing diversity of occupational pension systems in the EU Member States, while capturing all these systems into a single balance sheet.
In its advice EIOPA underlines the importance of a quantitative impact study (QIS) because it is crucial to further explore the possible impact on the financial requirements for pension funds that the holistic balance sheet and the various policy options within that approach might have. EIOPA is currently preparing for a QIS exercise and aims to publish results in the second half of 2012.
Besides the quantitative requirements, EIOPA’s advice also contains proposals to enhance qualitative requirements in areas such as governance and risk-management. These have been modelled on Solvency II with the necessary adjustments for IORPs. EIOPA advice calls for the strengthening of fit and proper criteria and for a proportionate, i.e. adjusted for the nature, size and complexity of IORPs, implementation of robust internal and external controls and sound risk management frameworks.
In addition, the document addresses information provision and member protection, particularly in defined contribution schemes. According to EIOPA advice, information needs to be relevant, correct, understandable and not misleading. EIOPA calls for the introduction of a Key Information Document for all defined contribution schemes which would allow members to have confidence in the scheme irrespective of where it is located in the EU.
To view EIOPA’s Advice to the European Commission on the review of the IORP Directive click on the following Link:
MFSA Ref: 09-2012
