EUROPE – A report by the European Insurance and Occupational Pensions Authority (EIOPA) has lamented the difficulty of identifying best practice for defined contribution (DC) pension funds due to the sheer diversity of systems within the EU.
The "Survey of EU Practice on Default Investment Options" was conducted as a follow-up to EIOPA's advice to the European Commission on the review of the IORP Directive.
In the survey, EIOPA found that multi-investment options are "quite common" in both occupational and personal pension schemes, and that a default option is generally provided on a voluntary basis.
Default investment options are used only in about half of EU member states, while the use of life-styling options is "very rare".
EIOPA found that supervisors tended to get involved only where multiple investment choices or default options were a legal requirement, "which means infrequently".
In most cases, the provision of multiple investment choices is not a legal requirement.
Instead, investment options are mostly provided voluntarily by providers or specified by employers, while provision of multi options is usually part of an agreement concluded with the provider.
This, in turn, influences the way in which the supervisory authority is involved in regulating default options, according to the authority.
EIOPA said an important driver for the survey was the steady shift towards DC provision, "where investment risks and the responsibility for optimal asset allocation, previously managed by professionals, were increasingly passed on to scheme members who usually do not have the relevant professional knowledge".
It added: "When there is a regulation stating that a default option should be provided, usually supervisory authority is substantially involved in supervision (or registration) of the default funds that is done on top of overall prudential supervision of the pension products/providers."
"The involvement of the supervisory authority varies across the member states – from setting the guidance for implementation to prior authorisation and ex-post checking."
Earlier this year, EIOPA argued that EU policymakers must change tack to increase the disclosure of information by DC pension funds.
The authority pointed to a "growing" need to help people plan their retirement more effectively by providing information focused on "behavioural purposes".
The authority called on Brussels to take a new approach, one directed towards the needs of scheme members.