A leaked copy of the European Commission’s long-awaited proposal for revising the directive on Institutions for Occupational Retirement Provision (IORP) sets out to "strengthen the capacity of IORPs to invest in assets with a long-term economic profile" and falls “well within the scope of the Commission’s agenda towards a stronger sector to support growth”.

It does not consider the introduction of new solvency rules.

The proposal calls for fiscal consolidation and long-term sustainability to be implemented hand in hand with EU member states’ structural reforms of their respective pension systems.

It is also meant to be consistent with and complementary to other initiatives in the field of financial services, such as Solvency II, MiFID II and the Alternative Investment Fund Managers Directive (AIFMD).

The proposal sets out four specific objectives: (1) removing remaining prudential barriers to cross-border IORPs; (2) ensuring good governance and risk management; (3) providing clear and relevant information to members; and (4) ensuring supervisors have the necessary tools to effectively supervise IORPs.

In November 2013, EU commissioner Michel Barnier, in his closing speech at EIOPA’s conference in Frankfurt, confirmed that the directive would not cover solvency rules but rather the governance and transparency of pension funds.

“Along with trying to solve cross-border issues,” he said at the time, “our aim is to create a framework in which pension funds can grow – especially in member states where they hardly exist today.”

He said EU member states that already had a developed pension fund sector with a high standard of transparency “should not be greatly impacted by this proposal”.

True to his word, the leaked draft states that the proposal does not consider the introduction of new solvency rules.

"Solvency rules are not directly relevant for DC schemes," it says. "Moreover, the Quantitative Impact Study conducted by EIOPA indicated that more complete data on solvency aspects are necessary before a decision can be taken on those aspects."

The proposal describes itself as a “minimum harmonisation legal instrument” and states that national authorities may go further if necessary for the purposes of member and beneficiary protection.

However, it states that the minimum standards within the IORP I Directive of 2003 are to be raised, with some parts of the new directive being reinforced by Commission delegated and implementing acts.

Blame for a general lack of reform by EU member states also appears in the text, particularly their failure to remove obstacles to cross-border activities.

Another is failure to ensure an EU-wide minimum level of consumer protection.

One stated aim in the leaked draft is to “take into account positive externalities arising from scale economies, risk diversification and innovation inherent to cross-border activity”.

Furthermore, it sets out to avoid regulatory arbitrage between different financial services sectors and member states.

Under the heading ‘Powers of interventions and duties of the competent authorities’, the text states that competent authorities may also restrict the free disposal of an institution’s assets when it has failed to establish sufficient technical provisions.

Another article states that the competent authorities may also transfer the powers of persons running an institution located in their territories, wholly or partly, to a special representative who is fit to exercise these powers.

As for the expected date of the final version of IORP II, the Commission mentions March, without providing a firm date.