Pension funds could be exempt from appointing a depository under the latest, and final, revision of the IORP Directive before negotiations with the European Parliament get underway.
The fourth compromise draft drawn up during Italy’s presidency of the Council of the EU also sees a streamlining of recommendations for the Pension Benefit Statement (PBS), and relaxes wording on requirements for the management of the funds to be “fit and proper”.
First published on 21 November, the draft was on 28 November endorsed as the compromise to be used during negotiations with the European Parliament.
The Latvian government, which will assume the rotating council presidency for the first six months of 2015, will begin negotiations next year, with the aim of passing the revised Directive after its first reading in Parliament.
In the negotiating mandate, the council said four key issues – the PBS, the risk-evaluation for pensions framework, regulating for the use of a depository and refining cross-border requirements – had been addressed.
The presidency was therefore confident the draft represented a balanced approach able to obtain the support of a “vast qualified majority”.
The draft upon which negotiations will be based has relaxed requirements for the appointment of a depository, stating that it would be up to individual member states to account for the “nature, scale and complexity” of schemes when deciding whether they will need to appoint anyone.
Other revisions that will please the UK market include changes for “fit and proper management” of IORPs, as earlier wording requiring all people involved in the institutions to possess professional qualifications were seen to rule out the use of lay trustees.
Instead, the revised draft requires the scheme’s governing body as a whole to have the requisite experience, and ensure that “qualifications, knowledge and experience are collectively adequate”.
A key change is the reinsertion of IORPs as a “pension institution with a social purpose”, distancing the Directive from earlier wording that regarded pension funds as financial service providers.
The concerns revolve around the IORPs’ often unique anchoring in social and labour law, with services mandated after agreement with social partners, rather than classing the provision as a financial product on par with that offered by insurers.
Finally, the draft continues to see the prescription surrounding the PBS reduced, with only two of the initial eight articles on the statement remaining within the Directive.
An earlier compromise text saw the European Insurance and Occupational Pensions Authority stripped of its responsibility for drafting the risk-evaluation for pensions guidelines.
Correction: The article initially stated that the latest draft continued to refer to IORPs as ‘financial service providers’. However, this was a reference removed from the second draft published by the Council of the EU on 28 November. Instead, mention of IORPs as ‘pension institutions with a social purpose’ was once again included.