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Member states are blocking 'prudent man' directive

EUROPE – As many as eight European member states may be blocking the proposed European Directive on occupational pension funds due to opposition to the prudent person investment rule, Othmar Karas, European Parliament rapporteur for the directive, has told the EFRP/NAPF International Conference in Brussels.

In a speech urging the European pensions community to help both the Parliament and Commission in its directive endeavours, Karas noted: “I have heard that six to eight member states are against the prudent person principle.”
He added: “The European Parliament needs your help.”

The ECOFIN council, Karas said, appeared to have a totally different view on pensions issues than the European Parliament, referring to last weeks meeting of the Council which dealt with the pensions directive in just five minutes.
“The council was only discussing the directive and not deciding.”
“The EFRP member associations should speak to their national government as they are the members of the Council.
“Please discuss your view with your finance and social ministers in each government.
“We need more powerful companies in the financial sector to discuss these issues at the member state level and not only at the European level.”

Looking at the reactions he had to the European Parliament’s report on the directive he said that some of the Council wanted to include the pay-as-you-go system and the book reserve system within the terms of the directive.
“The Parliament absolutely opposes this,” the rapporteur stated.

Karas also noted that in order to increase the efficiency and co-operation of pension schemes for the benefit of members it was essential to move from inflexible quantitative rules to investment principles based on prudent person.
“Such rules prevent or hamper optimum portfolio management and reduce returns.”
He continued: “Institution investors are long term, so a degree of flexibility should be granted to them to invest assets in an optimum way.
“We have managed to better define the principles so that there is an adequate degree of assets to be maintained, but that the management could be approached in a way that ensures liquidity, security and quality.”

The parliament’s imposition of a five-year time limit on quantitative restrictions (to be reviewed after three years) should help put pressure on the Council, he said.
It would also help member states to develop a share culture and adapt prudent person to each state.


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