The European Commission’s decision to postpone to summer 2013 its white paper on the IORP II Directive represents yet another delay in a highly protracted process that has to balance the need for reform of the first IORP Directive, the interests of occupational pensions and the insurance industry, as well as the Commission’s desire, as a lead global initiator of financial services legislation, to test the limits of its competence in harmonising EU laws.

The once uncontentious IORP Directive, which was prompted by the vision for pan-European pension funds with a view to promoting cost efficiencies and labour mobility, has become highly problematic. There is as yet no mass market for cross-border pensions; those entities that do offer pensions abroad - for instance, Denmark’s ATP in the UK - can do so well outside the scope of the IORP Directive. Sponsors of corporate pensions can pool their assets with a custodian, also outside the purview of IORP.

It is most worrying that there seems to be little intellectual space to challenge either the Commission’s notion that there should be uniformity between the prudential rules for occupational pensions and insurers “in so far as the risks underwritten by an insurance company or a pension fund are the same”, as the internal market Commissioner Michel Barnier put it in his speech announcing the IORP delay, or that European defined benefit pension funds should be subject to equal solvency requirements given the very different legislative and regulatory frameworks surrounding occupational pensions in the different countries.

The three most similar defined benefit countries, the Netherlands, Ireland and the UK, have markedly diverged in the last 10 years in their approach to occupational pensions regulation as they managed their transition from old-style final salary DB in very different ways. The very idea of a directive that would have remarkably little scope beyond those countries and Germany is highly contentious.

Barnier’s announcement on the delay to IORP is a welcome opportunity for those representing the interests of occupational pensions to focus on the holistic balance sheet proposal for IORP II and the planned quantitative impact studies.

But it seems highly likely that IORP II is being kicked into the proverbial long grass, in much the same way that the implementation of Solvency II itself has been repeatedly postponed. The UK Pensions Regulator does not see implementation of IORP II before 2017.

Since he was a Sarkozy appointee, Barnier’s Brussels shelf life is not likely to extend past the term of the current Commission, which ends in 2014, even if those who favour the much vaunted ‘level playing field’ between occupational pensions and insurers will outlive him.

So delay does not mean the current proposals are off the agenda. But IORP may fall to the back of the queue as Barnier and his officials tackle other more pressing areas of financial services legislation, which may mean the eventual IORP II focuses on governance and risk management, broadly mirroring pillars two and three of Solvency II (covering governance, risk management and supervision, and disclosure and transparency, respectively).

While this may seem less contentious, it is worth noting that these two pillars of Solvency II are currently the most troublesome for European insurers given the delay and lack of clarity in the precise requirements and the different interpretations of national regulators in charge of the detailed implementation.

But, within the boundaries of good sense, there is a much stronger case for a Directive that promotes improvements in risk management and monitoring within European pension funds. In countries like the UK, this would have the positive effect of promoting economies of scale and could prompt new models of co-operation and pooling of investment and risk management. Detailed solvency capital requirements may then have to wait for an IORP III Directive, and in the meantime the highly political decision on the right level of solvency funding for IORPs would be left with individual national governments, which is probably where it belongs in the first place.