Industry welcomes 'encouraging' news of IORP delay, study on long-term investing
EUROPE - European Commission plans to delay the publication of the revised IORP directive and examine how the reforms could impact long-term investing have been welcomed by the pension industry as "encouraging", although many still voice concerns over the direction of the current proposals.
Speaking at the Insurance Europe's annual conference last week in Amsterdam, the commissioner for the internal market, Michel Barnier, confirmed that Brussels would delay the publication of a draft version of the revised IORP Directive to next summer.
Barnier also announced the publication of a Green Paper on long-term investment, signalling some recognition of concerns from the pensions industry regarding their ability to act as long-term investors under a revised IORP framework.
Commenting on the Commission's move, Matti Leppälä, secretary general of the European Federation of Retirement Provision (EFRP), said he welcomed the revised timeline and argued in favour of an in-depth analysis of the potential quantitative impact the IORP Directive could have on pension funds.
"It is the first time the Commission [has] said the revised IORP Directive would be introduced in the summer 2013", he said.
"[It] is obviously a good thing that more time is now taken before the proposals come out as this is a sort of recognition from the Commission that a longer and narrower study is needed."
Leppälä stressed that five quantitative impact studies (QIS) were carried out before the implementation of the Solvency II framework for insurance companies - which is scheduled for January 2014 - and that similar studies should be conducted for the IORP Directive.
The Dutch Pension Federation also welcomed the revised timeline, arguing that any changes in the IORP Directive would be a "good thing".
A spokesman from the federation said: "The IORP Directive in its current form represents a major source of concern for Dutch pension funds.
"Therefore, we welcome the decision taken by the Commission to allow itself more time to conduct the full impact studies for the introduction of the directive."
However, other industry experts still expressed concerns over the "short" deadline the Commission was pursuing.
Dave Roberts and Mark Dowsey, both senior consultants at Towers Watson, argued that publishing the proposals for a revised IORP Directive in 2013 remained "highly optimistic" if the Commission was to take into account the postponed consultation paper on scope of the QIS.
"It is disappointing that the Commission still seems to believe it requires this degree of urgency to introduce the IORP Directive," Dowsey said.
"If the QIS is carried out, as we expect, during the last part of this year into early next year and if the first results available are not out before Q1 2013, then it is still remarkably quick to go from that position to drafting legislation in a period of a couple of months."
Last month, the European Insurance and Occupational Pensions Authority (EIOPA) said it was planning to publish a consultation paper on the QIS for the 'holistic balance sheet' proposal by mid-June, meaning that the results of the study would be postponed to the end of this year or beginning or next.
Once the consultation paper will be ready, EIOPA will then review all the responses coming from the industry and forward them to the European Commission.
The Commission will, in turn, have to approve EIOPA's methodology before the authority can launch the formal QIS on the holistic balance sheet approach.
Under the plans originally set by the Commission, EIOPA was expected to conduct the formal QIS in Q2 this year in the view of publishing its results at the end of September.
Additionally, Roberts criticised the crossover to insurance companies in relation to long-term guarantee.
He said: "There have been a lot of discussions over how to make Solvency II work for long-term investors and not a single solution has been found yet.
"There needs to be a closer consideration of Solvency II and IORP II and that has to happen together, as opposed to in parallel."
Finally, Paul Sweeting, European head of strategy at JP Morgan Asset Management deplored the fact that the commissioner still talks about a level playing field for pension schemes and insurers.
"This fundamentally misrepresents the degree of commonality between these two types of institutions," he said.
"Whilst both may provide retirement income, the differences between pension schemes and insurers can be profound."
Sweeting pointed out that insurance companies compete for business, whilst pension schemes typically serve only those employed by a particular firm or in a particular industry.
"Rather than talking about a level playing field for provision, it is more important to focus on the equality of outcomes for pension scheme members and insurance company policyholders."