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BAPF argues against investment rules

The Belgian Association of Pension Funds (BAPF) has reacted to the working document of the European Commission – entitled ‘Supervision of Institutions for Occupational Retirement Provision’ with a challenge to the notion that member states should be able to apply quantitative rules to investment.
In an amendment to the commission’s document, the BAPF notes: “Member states must ‘not’, in the case of institutions to which they issue an authorisation, be free to apply certain quantitative rules.”
In its response, the association asserts that: “no figures related to investment rules” should be put forward.
The BAPF also argues that including elements of cross-border affiliation in the forthcoming directive “could open up a can of worms” and dilute the effectiveness of the Commission’s proposals.
Commenting on the lack of reference to pension scheme anomalies, surpluses, bankruptcy or fraud cases, the BAPF also points to a need for distinguishing ‘prudent experts’, as well as the possibility of kite-marking DC products by an independent body.
In support of the working document, however, the association highlights the separation of fund from sponsor, custody from asset management and the introduction of a board of directors accountable to the sponsors, members and supervisory body as important measures.
The BAPF also welcomes the idea of the dynamic minimum funding requirement (DMFR), arguing that a legal solvency margin should only be required in “exceptional circumstances.”
Proposals for a market valuation of assets, the statement of investment principle (SIP), and freedom of investment and prudential principles are also applauded by the association.
And the Commission’s accent on affordability is flagged as especially important to smaller Belgian pension funds.
Furthermore, the notion of user-friendly information for DC plans – including clear information on asset allocation and risk profiles of fund choices is welcomed by the BAPF
Clarity, the association argues, is needed though on the issue of whether book reserves are excluded from the directive.
It also questions the Commission’s statement that members states will require institutions established within their territories to limit business activities to the scope of the directive.
In its suggestion, the BAPF says institutions should not be excluded from operating cross-border or engaging in financial activities: “whether alone or in conjunction with other similar institutions or other financial sector institutions.” Hugh Wheelan

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