IORP directive should require trustees to act with 'loyalty' [amended]
EUROPE - Trustees should be held more accountable in any future IORP legislation, according to a member of a European Insurance and Occupational Pensions Authority (EIOPA) stakeholder group.
Charles Cronin - in his response to EIOPA's Call for Advice on the revised directive for institutions for occupational retirement provision (IORP) - said any new directive should require trustees to act with "loyalty" to pension scheme members and beneficiaries.
He said this was not unlike obligations placed on trustees under UK Trust Law, which stipulates a trustee has a fiduciary obligation to look after a "vulnerable" person's best interests.
Cronin also called for more rigorous and transparent fund management systems, resourced by "suitably qualified" people.
He recommended replacing Article 18 of the current IORP directive with something akin to the recently revised Regulation 28 of the South African Pension Funds Act of 1956.
Under Article 18, institutions located in EU member states must invest in accordance with the 'prudent person' rule, with the assets being invested in the best interests of members and beneficiaries.
Similar to Article 18, Regulation 28 declares that a fund has a "fiduciary duty to act in the best interest of its members".
Contrary to the IORP revision, however, the South African regulation requires a "responsible investment approach" to deploying capital into markets that will "earn adequate risk-adjusted returns suitable for the fund's specific member profile, liquidity needs and liabilities", Cronin said.
He argued that Regulation 28, unlike the IORP revision, adequately supported the "long-term performance" of a fund asset, while taking environmental, social and governance factors into consideration.