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European Parliament agrees 'practicable, proportionate' IORP draft

Amendments to the IORP Directive proposed by the European Parliament could trigger “welcome reform”, bringing with them a relaxation of cross-border funding requirements and a greater focus on environmental concerns.

Following Monday’s vote by the parliament’s Economic and Monetary Affairs Committee (ECON), PensionsEurope praised MEPs in pushing for a “practicable, proportionate and less prescriptive proposal” compared with that tabled by the Commission in 2014.

However, despite parts of the industry welcoming revisions of the proposed universal benefit statement, concerns remain that the passed amendments contradict the European Commission’s stated aim of improving transparency. 

Sophie In’t Veld, a shadow rapporteur on the revised Directive, welcomed the removal of “unnecessary obstacles” for cross-border activity but said her parliamentary group of liberal MEPs wanted to go further, allowing for “innovative” arrangements.

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“It is to be expected that, in the era of FinTech, new products will enter the market that are outside the regulated area,” said In’t Veld, also a vice-president of the Alliance of Liberals and Democrats (ALDE).

“We need to be much more forward-looking and do more to prepare for these kinds of innovations.”

PensionsEurope chief executive Matti Leppälä said the industry group was pleased with the changes to cross-border funding requirements, which would see them subject to the same requirements as domestic funds.

“This is a welcome reform,” Leppälä added, “which should make it easier to establish and operate cross-border pension schemes.”

The association’s chairman Janwillem Bouma said PensionsEurope was also pleased with the more proportionate position adopted by ECON, which he said would allow member states to tailor requirements to their individual systems.

Bouma added: “It is important to take into account different types of pension schemes, as well as the role social partners have, and the differences in social and labour law.”

UK responsible investment charity ShareAction also welcomed the vote, after MEPs reinserted language on environmental risk assessment initially removed by member states.

The charity’s senior policy offer Camilla de Ste Croix said the vote showed the responsible investment debate was “shifting in the right direction”.

“By voting in favour of measures to mandate the consideration of environmental risks in pension schemes’ investment processes,” she said, “MEPs have shown they recognise the very real risks that environmental issues can pose to investment portfolios.”

The Commission’s initial proposal suggested that environmental risks be assessed as part of the proposed wider evaluation of a pension fund’s risk profile each time a “significant” change occurred.

PensionsEurope also welcomed a “simplification” of the universal Pension Benefit Statement (PBS), which consumer group Better Finance had previously warned against.

Ahead of the vote, Better Finance’s Guillaume Prache impressed upon Hayes the need for the PBS to be as transparent as measures in place in the US.

In a letter from Better Finance to Hayes and ECON chair Roberto Gualtieri, Prache strongly protested against any amendments that could be “a very significant step back in the protection of EU pension savers”.

The letter also said the amendments risked “a severe watering down of the information that IORP participants would receive”.

It said any action to undermine transparency could contradict the Commission’s recent work around the Capital Markets Union.

“The recent Capital Markets Union Action Plan expressly asks the European Supervisory Authorities to promote the transparency of long-term retail and pension products and an analysis of the actual net performance and fees,” Prache said.

The approved draft will function as the parliament’s negotiating position as the trialogue negotiations get underway between member states, MEPs and the Commission.

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