BaFin, the German financial supervisory authority, has clarified details that pension schemes need to disclose on investment strategies.

The regulator has shed light on the requirements of the Statement of Investment Policy and Principles (SIPP), and took into account documents that highlight the use of governance and risk assessment in the supervision of IORPs published by EIOPA, based on the IORP II Directive.

In its latest decision, BaFin made note of the Art. 30 of the IORP II Directive implemented in Germany in the Insurance Supervision Act (VAG) sections 234i, 239 paragraph (2).

According to VAG, IORPs are required to provide a statement on the principles of their investment policy four months after the end of a financial year at the latest, or immediately after a major change in investment policy.

This means that IORPs with the financial year ending at the end of December 2019 should have published their investment policy statements containing the detailed requirements for the first time by the end of April.

But given the exceptional circumstances caused by the COVID-19 pandemic, BaFin, which published its decision on April 24, said it did not object if IOPRs would not follow the requirement in 2020.

“Considering the date of the publication and the current situation, we welcome the operational relief for this year,” Klaus Stiefermann, managing director at aba, the German occupational pensions association, told IPE.

Stiefermann added: “The BaFin statement was expected, however, we don’t consider it necessary in this form.”

“The BaFin statement was expected, however, we don’t consider it necessary in this form”

Klaus Stiefermann, managing director at aba

“By providing a detailed opinion, EIOPA pushed national competent authorities to follow suit, but defining the information about these “principles” with numerous detailed requirements seems excessive,” he said.

Aba has urged pension schemes over the past years to provide such statements to relevant parties, including members, beneficiaries and BaFin. “According to the revised directive, IORPs now have to publish the[se] statement[s],” Stiefermann said.

Andreas Kopfmüller, investment expert at Mercer Deutschland, told IPE that asking to present investment strategy statements, annual verification processes and details on ESG criteria would increase the effort for IORPs to create and update their principles of investment policies.

“It is another layer of reporting requirements that will need to be covered also by smaller providers that might already be at their resource limit,” he said.

Kopfmüller expressed doubts that the actual addressees, for example the beneficiaries, have the necessary know-how to understand the details required by BaFin.

“In our opinion, it would make more sense to use a scheme with a predefined scale, which the respective companies must fill out for the individual thematic blocks, for example assessment of return, risk content, or degree of sustainability,” he told IPE, adding that details improve the capacity to compare principles between different companies.

“Some of the regulations, for example details on ESG, were recently added to the law and are now being completed by BaFin. This has nothing to do with the current crisis, but comes through BaFin’s agenda despite the crisis,” Kopfmüller said.

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