IORP could increase workload for managers of Spanish schemes

SPAIN – The revised IORP Directive could force control committees managing Spanish pension funds to take on greater responsibilities, in turn reshaping the way schemes are managed in the country, Deloitte has warned.  

Jaume Jardon, pension manager at Deloitte in Barcelona, pointed out that, in Spain, the management committee – under which the control committee falls – is responsible for managing pension funds.

This is in contrast to the UK, for example, where pension fund trustees are the ones who make investment decisions, he said.

Jardon suggested that pillar two of the revised IORP Directive, which addresses governance, could alter the relationship between the management entity running the pension fund and the control committee.

"Decisions will need to be made due to the new requirements set under the governance pillar of the directive," he said.

"And, at the end of the day, the control committee retains all the decisions related to investment decisions taken by the pension fund."

If, as a result of revisions made to the IORP Directive, the control committee is given more oversight responsibility, Deloitte suggested its members be remunerated.

The consultancy said governance at Spanish pension funds should be "deeply studied" against new requirements linked with pillar two of the new Directive.

"This is due to the contract-based structure of the pension funds, with management entities already under strict requirements," it said. "Some specific aspects, such as internal audits or 'own risk and solvency assessments' (ORSAs), are seen as a real challenge."

Under Solvency II, insurance companies will be required to perform their own risk and solvency assessments, which will then become a component of their risk-management systems.

According to regulators in Brussels, the ORSA process will make decision-making and strategic analysis more transparent.

The European Insurance and Occupational Pensions Authority (EIOPA) has already suggested that pension funds will be expected to run an ORSA process in future.

Jardon said Spanish pension funds were keeping a close watch on the final version of the ORSA process currently being developed by the European Commission.

Now that Brussels has decided to postpone the introduction of pillar one of the revised IORP Directive, he said, the Commission might be tempted to introduce capital requirements through ORSA documentation.

Dave Roberts and Mark Dowsey, senior consultants at Towers Watson in the UK, expressed similar concerns in May.

"We might end up doing pretty much what we should have done within pillar one anyway," they said.

"And, depending on the final outcome of the ORSA, we might see pension funds having to comply with capital requirements."