Germany’s pensions industry, government, parliament and experts have voiced strong opposition to key elements of the European Commission’s proposed review of the IORP II Directive.
Beate Petry, chair of the Arbeitsgemeinschaft für betriebliche Altersversorgung (aba), Germany’s association for occupational pensions, said the review would lead to additional regulation and extend the powers of supervisory authorities.
The revised IORP II framework includes investment regulation with quantitative restrictions for defined benefit (DB) schemes, stricter sustainability requirements and amended proportionality criteria.
According to Petry, the European Commission is seeking more uniform regulation and oversight of IORPs, including powers for the Commission through delegated acts and for the European Insurance and Occupational Pensions Authority (EIOPA) through guidelines to further define and develop rules in detail.
“This comprehensive regulatory programme contradicts the goal of less bureaucracy, and to the [goal of] promoting supplementary pensions,” she said at aba’s annual conference in Berlin last week.
Germany remains heavily dominated by DB pension schemes, and the revised IORP II framework could lead to higher capital requirements for both IORPs and sponsoring employers, Petry added.
“That cannot and should not happen,” she said.
Aba is, therefore, calling on the European Commission to withdraw its proposal and replace it with measures supported by a proportionate regulatory framework for IORPs in the interests of stakeholders.
Independent consultant Peter Gremke also stressed the need for a comprehensive impact assessment of the Commission’s proposals.
Moreover, he said the possibility of introducing individual occupational pensions through the revised IORP II framework does not fit the “trilateral world” of employers, employees and pension funds, speaking at the aba event.
Criticism of the review has also come from social partners.
Oliver Zander, chief executive officer of employers’ association Gesamtmetall, said the new rules would place additional burdens on companies at a time of economic difficulty.
Concerns over consolidation
The Bundesrat, the constitutional body representing Germany’s federal states, sees a risk of “systemic disruptions” arising from the IORP II review in relation to Germany’s existing legal framework.
The Bundesrat has urged the federal government to monitor the legislative process closely and advocate for EU rules that do not weaken occupational pension provision in Germany.
While Germany supports the European Commission’s objectives of strengthening supplementary pensions and mobilising private capital for long-term investment, the government does not share the view that consolidation automatically results in stronger pension systems, according to Till Cordes of the insurance department at the finance ministry.
“Even smaller IORPs can be very profitable, and in particular, the role of regulatory law should not be to force consolidation,” Cordes said at the aba event.
Another contentious issue is the proposed removal of investment limits for DB schemes under the revised IORP II framework.
The limits are embedded in Germany’s investment regulation, the ‘Anlageverordnung’, and have functioned effectively for the domestic pensions industry, Cordes said.
Financial supervisor BaFin also supports retaining national quantitative investment regulations that are straightforward to implement.
