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aba fears ‘disastrous’ impact of German IORP II bill

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The German government’s proposal for implementing the IORP II directive will have “disastrous” consequences if no adjustments are made, according to aba, Germany’s leading occupational pensions trade body.

The government’s bill for implementing the EU pension fund legislation was published in early September and was recently debated in the lower house of parliament. It was referred to the Bundestag’s finance committee, which is to hold a hearing on it in early November.

In aba’s view, the government’s approach was problematic because it sought to implement the rules within the framework of Germany’s insurance supervision law (VAG), which is set up to regulate the insurance industry in accordance with the EU “full harmonisation” approach of Solvency II.

IORP II, however, was about “minimum harmonisation” across the EU, aba said, but this was so far not reflected in the VAG. 

Minimum harmonisation gives EU member states greater flexibility in how they implement the directive, in light of how occupational pension schemes vary across member states and their close links with national labour and tax laws. 

The association said Germany should not just implement the individiual articles of IORP II, but also its “spirit”.

Full harmonisation, explained aba’s secretary general Klaus Stiefermann, meant that “every EIOPA guideline, every recommendation has to be adopted by the German supervisor”.

Westhafentower EIOPA

Aba is concerned that IORP II will push up costs for Germany’s pension funds

“The result is that, by implementing IORP II in a national law that caters for full EU harmonisation, you get full harmonisation via EIOPA and that is precisely what was supposed to never happen,” he added.

Earlier this year BaFin, the German supervisor, said it had rejected only very few of the 180 guidelines and 3,000 questions and answers that the EIOPA and other EU supervisors had issued so far.

Aba said it feared that new requirements coming from EIOPA would not be suitable for German pension funds. It highlighted that the insurance sector dominated pension provision in the EU, as only a few member states had meaningful pension fund sectors. This was reflected in the membership of EIOPA’s decision-making bodies, aba argued.

The association has urged the German government to make changes to three articles in particular in the VAG to accommodate the minimum harmonisation intent of IORP II.

One of these concerned co-operation between German supervisors and EIOPA, and “does not even envisage government ministries or parliament being able to review which and how EIOPA standards – also with regard to German labour and social law – will be appropriately applied to regulate German IORPs”, aba said.

Extensive further EU regulation that was neither suitable for German pension funds nor necessary would ultimately make occupational pension provision more expensive without benefitting pension plan members, added aba.

The association also emphasised the importance of the IORP II implementing text needing to be in tune with – or at least not contradict – the Betriebsrentenstärkungsgesetz (BRSG), the major pension reform law that came into effect in January 2018.

Aba’s opinion on the government’s IORP II implementation bill can be found here (in German)

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