You can almost hear the sound of satisfied occupational pension fund representatives rubbing their hands together at the news that the IORP II Directive has been postponement.
Speaking at a conference organised by the insurance industry in June, Commissioner Michel Barnier said: “Given the complexity and importance of this issue, and particularly the need for first-rate quantitative impact assessment… we therefore expect to table the revised Directive before summer 2013, rather than at the end of 2012.”
In March the Commission had re-stated the earlier deadline. Presumably, it then considered that it was high time to draw up a firm deadline, following discussions going back to 2006.
However, the new delay will give the European Insurance and Occupational Pensions Authority (EIOPA) in Frankfurt more time to carry out a quantitative impact study
(QIS) into its advice document on the IORP Directive of 15 February. Work on the QIS
could begin in October, preceded by a consultation on the methodology.
The main issues are the application of Solvency II and proposed holistic balance sheet rules to pension funds, as well as portability rights for employers who move across EU internal borders.
Another concern is employer insolvency; the Commission has stated that national government rules left “considerable latitude” to the protection given to pensioners. Representatives of occupational pension funds are afraid that more stringent rules could result in employers walking away from their voluntary schemes.
Matti Leppälä, the secretary general of the European Federation for Retirement Provision, agrees that the new timeline will allow EIOPA to carry out a thorough QIS. EIOPA will work with pension supervisors to collect data on how the new prudential rules will affect pension funds. Leppälä stresses how important it is to fully examine the affects of any holistic balance sheet approach on IORPs and on the economy.
Similarly, Rebekah Smith of Busininess Europe, is happy that the Commission has decided to take more time, “due to the complexity of the issues”. And Gert Kloosterboer of the Dutch Pensions Federation, says: “We are happy with the postponement. EIOPA has a lot to do.” On cross-border pensions, he repeats that these are technically “not feasible”.
However, Chris Verhaegen, the chair of the EIOPA’s stakeholders group for pensions, believes that a six-month delay is “not enough”. Barnier should have delayed the revision for around 12 months, she says. EIOPA would have had more time to examine strategic issues such as changes in employment conditions, changes in investment patterns and their wider economic impacts.
Economic issues, notably portability, are also touched on by AmCham EU, the US chamber of commerce in Brussels. Five years ago the chamber criticised EU member states for measures “that seriously hampered cross-border portability of pensions”. Today, the chamber’s position is that portability is holding back EU economic development - US investment in the EU now totals €1.8trn.
Reaction from the insurance sector to the postponement is interesting. Referring to Solvency II and holistic balance sheet rules, it has continuously insisted on “a level playing field…for all financial institutions providing occupation pensions”. However, Insurance Europe has not commented on the delay.
Looking to the future, the European Parliament is urging the Commission to table all remaining legislative proposals by March 2013. The assumption is that it could take up to one year to finalise the dossier.
Mark Dowsey, senior consultant at Towers Watson, forecasts that the European Parliamentary committee stage might not start until autumn 2013. The matter could even conflict with the next change of Commission in 2015.