The upcoming review of the EU’s pension fund legislation should be imbued with a sense of urgency about the need to deliver adequate and sustainable pensions to EU citizens, according to EIOPA’s outgoing chair Gabriel Bernardino.
Bernardino is due to step down next month. Peter Braumüller, managing director of insurance and pension supervision at the Austrian financial market regulator FMA, and EIOPA vice-chair, will take on the role of interim chair until a successor to Bernardino is appointed.
The board of supervisors relaunched the recruitment procedure last year. Fausto Parente, EIOPA executive director, explained to journalists this was because it did not agree on a shortlist, having not been “content with the level of the three possible candidates”.
The board is due to meet in March to appoint a shortlist, which will then be passed on to the EU co-legislators who have the final word.
Addressing delegates tuned in to EIOPA’s 10th anniversary conference yesterday, Bernardino said not enough progress had been made on pensions adequacy.
He said there was a need “to walk the extra mile and create conditions, both at national and European levels, to incentivise the creation of more funded complementary private schemes”.
“While maximum impact could be achieved with the implementation of auto-enrolment mechanisms, the forthcoming review of the IORP II Directive will also be a great opportunity to implement a fresh and more ambitious agenda,” Bernardino added.
“Incremental change is not sufficient though. We need a sense of urgency to embark on a true paradigm shift.”
Reprising points shared with IPE in an exit interview, Bernardino said pension fund governance and transparency requirements needed to be adjusted to “the digital age”, the Directive needed to be focussed on the protection of members in defined contribution schemes (DC) as “the future market reality”; and that an optional pan-European framework for occupational pensions should be created to harness benefit from economies of scale in the single market.
At a later press conference, Bernardino confirmed that in his view the pan-European occupational pensions framework should focus on DC pensions.
On the sustainability theme, he said the IORP II review should “ensure that the prudent person investment principles have a clear focus on environmental, social and governance (ESG) factors”.
EIOPA has previously suggested to the European Commission that pension funds be required to consider the environmental and/or social impact of their investment activity, as well as the implications of ESG factors for their investment portfolios, and according to Bernardino’s exit interview this remains EIOPA’s view.
At yesterday’s conference Bernardino also urged for a new approach to consumer disclosures.
“Too much information kills information,” he said, calling for a clear separation between market and supervisory information and information to consumers, and for requirements to be fit for the digital age, use layering approaches and labelling in order to engage a non-financially literate audience.
He did not cite pension-specific legislation in this context, but Bernard Delbecque, chair of the EIOPA Occupational Pensions Stakeholder Group and senior director for economics and research at the European Fund and Asset Management Association, later said Bernardino’s message about disclosure reform should apply to incoming requirements under the EU sustainable finance disclosure regulation (SFDR).
Delbecque indicated the SFDR rules would be positive in that they would accelerate demand for change among pension fund members and hopefully empower end-investors and increase their confidence in sustainable investment. However, the SFDR rules needed to be kept simple, he said, and Bernardino’s message about disclosure reform should apply to the SFDR.
EIOPA and the other two European Supervisory Authorities yesterday delivered the final draft regulated technical standards for the SFDR, having made some changes, including template simplification, in response to stakeholder feedback.
Sustainable assets supply
During a panel discussion about the economic recovery from the coronavirus crisis, Martin Merlin, a director in the European Commission’s financial services and CMU department, addressed concerns that too much responsibility was placed on the pensions and insurance sector in the context of the sustainability transition.
He said the private sector had a major role to play, but that the public sector was making “a considerable effort to pay its fair share, especially in the recovery context”.
Citing the EU Council’s target of 30% of recovery spending would be directed to climate action, Merlin said the Commission believed this would lead to an increase in the supply of sustainable investment opportunites.
The lack of such supply had been brought up before during the panel by Andreas Brandstetter, president, Insurance Europe and chairman and CEO of UNIQA Insurance Group, Austria.
”The key issue is limited availabitly of suitable assets to invest in,” said Brandstetter.
“We cannot do this transition alone. We need the Green Deal to create a shift across society to have real sustainable activities that we can invest in and insure.”