The Council of the European Union confirmed it has reached an agreement with the European Parliament on the revised EU directive for occupational pension funds, which it said would “reinforce their role as institutional investors and help channel long-term savings to growth-enhancing investments”.
The statement by the Council today, 30 June, is the first official announcement of the agreement on the final proposal for the revised IORP II Directive.
The European Parliament also today announced that a deal had been reached.
The Dutch government, which holds the rotating presidency of the Council (at the time of writing, only for a few more hours), has since published the text of the draft directive following calls from its parliamentarians that they debate the law.
The Council’s agreement with the European Parliament was approved today by the Permanent Representatives Committee, the final stage of decision-making on the Council of Ministers side.
Provisional agreement had been reached with the parliament on 15 June, the date of the sixth political trialogue on the recast directive.
The Council said the directive was expected to be approved by the European Parliament at first reading, and that it would then be submitted to the Council for adoption.
The parliament’s first reading is understood to be scheduled for a plenary session in early September.
Member states will have two years to transpose the directive into national laws and regulations.
The PLSA, the occupational pension fund association in the UK, noted that the implementation period was a “modest extension” from the 18 months in earlier drafts.
Amid the uncertainty triggered by the recent UK vote to leave the European Union, lawyers and other pension experts have noted that current UK law, incorporating a substantial amount of EU pensions law, continues to apply just as it did before the referendum until changes are made, which will be a matter for the government and parliament.
Commenting on the final text of the revised IORP Directive, the PLSA said: “Note that we can expect some consultation from [the Department for Work and Pensions] or [the Pensions Regulator] on the precise details of implementation in the UK, so schemes will have only a short period in which to adjust their arrangements to ensure compliance.”
Cross-border, governance, transparency
In its announcement, the Council said the revised IORP Directive was aimed at “facilitating the development of IORPs and better protecting pension scheme members and beneficiaries”.
It added: “The directive will improve the governance and transparency of IORPs and facilitate their cross-border activity.”
The directive has four objectives, according to the Council:
- Clarifying cross-border activities of IORPs
- Ensuring good governance and risk management
- Providing clear and relevant information to members and beneficiaries
- Ensuring supervisors have the necessary tools to effectively supervise IORPs
The European Parliament, in its statement on the IORP II agreement, highlighted as achievements that the overhauled directive clarifies the cross-border transfer of pension fund portfolios and what happens in the event of underfunding when pension schemes engage in cross-border activity.
Brian Hayes, Irish MEP and the rapporteur for IORP II, said: “We have achieved the right balance between respect for difference but also ambition for new cross-border activity.
“In changing the rule on how cross-border schemes are established, on how pension schemes are transferred and how schemes can be funded, we have brought certainty to the process.”
The Parliament also said the revised directive enhanced protection for members and beneficiaries, including via the introduction of a Pensions Benefit Statement.
The requirement for pension funds to consider ESG risks, meanwhile, is “a new measure of its kind for a financial services directorate”, it said.