If IORP ain’t broke, don’t fix it - EFRP
EUROPE - The European Federation for Retirement Provision (EFRP) has told the European Commission there is still no evidence the IORP Directive is failing, making harmonisation of work place pensions and introduction of solvency II-type requirements within the IORP Directive premature.
Chris Verhaegen, secretary general of the pensions representative body, told IPE today Europe should wait at least another four years before attempting a review of the Institution of Occupational Retirement Provision (IORPs) Directive.
In a response to a European Commission consultation on the harmonisation of solvency rules applicable to IORPs covered by article 17 of the directive and IORPs operating on a cross-border basis, the deadline of which passed late last month, the organisation criticised not only the consultation's timing but also its assumptions on bearing risk.
Chris Verhaegen has instead pleaded in the first instant for a Commission-led discussion on the common characteristics of the various EU pension systems, before implementing any harmonising measures.
The EFRP is currently working on its so-called "three-pillar note", to get views from all its members to help the EC set up such a discussion, and Verhaegen said the EFRP aims to conclude the note before the selection of a new European Commission in six months' time.
In its response today, the EFRP noted : "Few, if any, IORPs classified by Member states or CEIOPS as Article 17 IORPs carry all their own risks in the way assumed by the consultation."
It continued: "Although they may hold regulatory own funds as referred to in Article 17(2) they have other security mechanisms, including support from the employer/ sponsor, and hence do not resemble insurance undertakings."
The EFRP is adamant that the proposed Solvency II directive to IORPs with regulatory own funds, as outlined under article 17 of the IORP directive, would result in sponsors withdrawing from define benefit scheme, and cause a shift from equity to bond investments, negatively impacting financial markets.
The organisation argues instead that there is no evidence that article 17 is failing in providing sufficient protection, neither are there material differences in the way it has been implemented.
Article 17 of the directive refers to the current solvency directive for insurers, Solvency I, which is the precursor to Solvency II.
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