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IPE special report May 2018

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EC moves towards ‘prudential’ approach

The European Commission is pushing forward rapidly in its bid to draw up a prudential directive on supplementary pensions by requesting that member states and industry associations respond this month to a working document based on last May’s communication.
The document, entitled: “Supervision of institutions for occupational retirement provision” was dispatched by the Commission in December .
Mirroring much of the May communication’s line, it reiterates the need for prudential investment requirements and rules covering pension fund assets and liabilities.
Martin Merlin at the Commission comments: “We expect comments from the industry by mid-February and then we will launch a revised version of the text. This is a new document which puts into the form of a draft directive the substance of last May’s communication. We are very much on the same lines though.”
Included is the proposal to allow ‘appropriate’ use of capital markets to raise security and efficiency, with a qualitative approach to investment rules recommended.
Legal seperation between the ‘undertaking’ company and the pension fund institution is also out forward.
And flexibility in funding rules is suggested, with the Commission noting that when liabilities are considered in the long term: “The rights of beneficiaries do not seem to be directly threatened in the event of a short-lived fall in the value of assets.”
Furthermore, member states are asked to identify institutions which would be covered by such a directive.
The document stops short of any explicit proposals on pan-European pension provision, but suggests that co-ordination of prudential rules is a “pre-condition for the realisation of cross-border affiliation”, and proposes a “co-operation mechanism between competent authorities”.
Another idea put forward is the establishment of a group on the lines of the ‘pensions forum’ (labour mobility issues) to solely tackle the financial issues.
Chris Verhaegen at the European Federation for Retirement Provision (EFRP), comments: “We are currently considering our position with reference to the working document. The Commission is a step ahead. They will not go forward with any firm proposals before receiving the opinion of the European parliament, but in the meantime they have started informal conversations with national supervisors and are putting a lot of weight on their views.”
The European parliament is currently preparing its report on the May communication with adoption by the plenary expected in March/April. Hugh Wheelan

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