The European Commission will no longer allow national regulators to restrict a pension fund’s exposure to assets such as equities, removing a member state’s ability to cap allocation to equity to as little as 10%.

The revised IORP Directive, released today, proposed a number of amendments to investment rules, such as removing from member states the ability to restrict investment in assets that could promote growth.

Discussing the changes at a press conference attended by internal market commissioner Michel Barnier, Klaus Wiedner, head of the pensions and insurance unit, said national regulators’ ability to limit exposure to as little as 10% of assets had been taken away.

“Now what we have is 70% [of assets as] the only restriction possible that the supervisor can impose on pension funds,” he said.

Under Article 20 of the revised Directive, member states will no longer be allowed to prevent IORPs that offer guarantees, such as those offered by defined benefit funds, from investing up to 70% of assets in “shares, negotiable securities treated as shares and corporate bonds admitted to trading on regulatory markets”.

Wiedner added: “Obviously, that doesn’t mean that, within that 70%, the supervisor should not check which investments are coming out.”

In a move meant to allow pension funds to invest in infrastructure, aided by Commission proposals for a central database on infrastructure loan credit history, national supervisors will also now be unable to restrict exposure to any instruments deemed to have a long-term economic benefit, even if these are unlisted.

However, the change to the ability of member states to impose “relative weight” restrictions on pension funds will be more significant, especially in countries such as Germany, where pension funds are significantly underweight equities when compared to their counterparts in the Netherlands and UK, where national regulators have a more positive view of stock investments.