The changes proposed to the EU pension fund framework by the European Commission entail an increased administrative burden for IORPs and an “extensive lack of proportionality”, according to PensionsEurope.
It said the proposed changes needed to take into account the national specificities and characteristics of the EU pension fund sector, with important differences between countries’ social, labour and tax law, in which pensions are deeply rooted.
The current IORP II Directive recognised this diversity, but many of the amendments the Commission put forward as part of its November supplementary pensions package “go far beyond what can be considered a minimum harmonisation framework”, said the Brussels-based umbrella association for European pension funds.
It noted that the Commission had not conducted a proper impact assessment before launching its IORP II review proposal, which it said was not in accordance with the EC’s own guidelines to improve regulation.
Multiple concerns
In general, PensionsEurope expressed more criticism than approval of the changes proposed by the Commission.
It is concerned, for example, by a proposal to introduce an investment framework solely based on a risk-based prudent person principle, and “very critical” about a plan to remove ‘size’ and ‘internal organisation’ from general proportionality criteria.
The latter move, it said, would increase compliance costs for smaller EU pension funds.
With respect to the prudent personal principle, it said it continues to support the prudent person rule and that any reform should preserve member states’ discretion, “avoiding unnecessary rigidity and ensuring that the investment capacity of IORPs is not inadvertently constrained”.
However, it also said that where member states decide to keep quantitative limits at national level, “they should be proportionate and should not operate in a way that unduly restricts well-justified long-term investments, including exposure to alternative and less liquid asset classes consistent with the long-term nature of IORPs”.
Another emerging point of tension in the Commission’s IORP II proposals is a batch of amendments related to underperformance and benchmarking, which PensionsEurope said “should not be target categories” for supervisory authorities.
The specification of a benchmark for underperformance raised significant conceptual and operational questions, it said, noting, for example, that benchmarking could lead to “synchronisation” of investment allocations.
EFAMA and the Dutch pension fund federation have also expressed concerns about the benchmarking amendment.
PensionsEurope also said it disagreed with changing the scope of the IORP II legislation and that it opposed the proposals “concerning the enhanced empowerment of not only national competent authorities, but also the European Commission and EIOPA”.
Holistic Balance Sheet debate again?
PensionsEurope also sees some of the proposed amendments eventually leading to the introduction of Solvency II or similar capital requirements and said it was fully against those proposals, which smacked of a restart of the Common Balance Sheet debate during the previous IORP II review.
The lobby group also expressed its opposition to a standardised EU-wide pension benefit statement and a proposal directly obliging IORPs to provide information to a national pension tracking service.
It also said it opposed the proposal to introduce the concept of double materiality and the integration of member sustainability preferences when IORPs can gauge them.
It was positive about certain cross-border proposals, however, such as one concerning the facilitation of the authorisation and supervision by home and host authorities.
“We believe that these proposals are positive steps and will facilitate the activities of the cross-border IORPs,” it said.
It is now up to the EU Council and European Parliament to come up with their own positions on the Commission’s proposal.
