The European Commission’s impact assessment of the revised IORP Directive has been slammed for lacking balance and evidence, while failing to identify all “reasonable” options for reforming Europe’s pensions sector.
The report, prepared by the Ex-Ante Impact Assessment Unit, the European Parliament’s department responsible for scrutinising the Commission’s proposals, said the executive’s initial impact assessment (IA) from 2013 examined only an artificial range of options, negatively affecting the depth of the analysis undertaken.
While accepting the IA quoted from a range of sources, it criticised that three of the charts included were based on data provided by a single company and was therefore “lacking the necessary balance”.
“Generally speaking, the IA does not seem to identify all reasonable options for addressing the problems,” the report continued.
It noted that many areas targeted for reform under IORP II could conceivably be tackled in a different manner – such as allowing pension funds to employ an external auditor rather than insisting schemes build up an internal audit function.
“Only in one case – for the safe-keeping and oversight of assets functions and the appointment of a depository – are two alternatives presented and, on the face of it, policymakers are given a tool to choose among competing actions,” it said.
Prepared for the Parliament’s Economic and Monetary Affairs Committee (ECON), the report remained diplomatic and praised the IA for attempting to tackle “in a logical way some real problems”.
“However, the evidence corroborating some statements of the IA is lacking,” it added.
“Furthermore, the framing and analysis of the options is rather artificial.”
It also said it was “perhaps significant” that the two countries with the largest defined benefit markets – the Netherlands and UK – had raised concerns over the suitability of the Commission’s attempt to regulate a matter best left to member states.
“Finally, it should be noted that the Commission appears to have adopted the proposal for this recast Directive without a positive opinion of the Commission’s Impact Assessment Board on the accompanying IA, despite its internal rule that such an opinion is, in principle, necessary before adoption,” it said.
The Directive, published in spring this year, has undergone a number of revisions under the Italian presidency of the Council of the EU.
Most recently, a compromise draft attempted to strip the European Insurance and Occupational Pensions Authority (EIOPA) of its ability to set the standards behind the proposed risk-evaluation for pensions.