Euro area IORP assets up 8% in 2016: EIOPA

Total assets held by occupational pension funds in the euro area grew by 8% in 2016, according to the latest financial stability report from the European Insurance and Occupational Pensions Authority (EIOPA).

In the European Economic Area (EEA), total assets held by institutions for occupational pension funds (IORPs) fell by 0.2%. EIOPA said this was attributable to sterling’s substantial depreciation in 2016, “negatively affecting the euro value of total assets in country with the largest IORP sector in Europe, the UK”.

Excluding the UK and the Netherlands, total European occupational pension fund assets grew by 5% in value over the course of 2016.

Traditional defined benefit (DB) plans accounted for around 75% of the European occupational pension fund sector in terms of assets, according to EIOPA.

Investment allocation of pension funds in the EEA remained broadly unchanged compared with 2015, although equity investments in the euro area increased by 2%, partly driven by higher equity exposures in the Netherlands.

Preliminary data indicated that the funding situation for DB schemes improved in 2016, with average coverage ratios slightly increasing, according to EIOPA.

However, Gabriel Bernardino, chairman of EIOPA, said coverage ratios “remain a concern for a number of pension funds”.

The average rate of return on assets increased in 2016, which EIOPA said could be partly attributed to the strong stock market performance during the final months of last year. 

Overall, the authority said the European macroeconomic environment remained fragile, with some signs of improvement. Uncertainties stemming from the political environment as well as emerging risks posed challenges for both the insurance and occupational pension sectors. 

The 2016 occupational pension fund data used by EIOPA was preliminary and subject to revisions. UK data only referred to DB and hybrid schemes. For some statistics data from certain countries was not available.

The European Central Bank is preparing a regulation on statutory reporting requirements for pension schemes, intended to help gauge pension funds’ potential impact on financial stability.