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​IORP II remuneration policy ‘impossible’, PensionsEurope warns

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  • Guild Halls in Brussels, Belgium

It will prove impossible to force asset managers to comply with a pension fund’s remuneration policy, as proposed by the revised IORP Directive, PensionsEurope has warned.

In its position paper on the Directive, based on the initial IORP II draft published in March, the European association argued in favour of several significant tweaks to the proposed risk-evaluation for pensions (REP), including a relaxation of sponsor assessment requirements and risks stemming from climate change.

The paper said matters of remuneration should be the concern of member states, rather subject to delegated acts by the European Commission.

Concerns were raised about the draft’s proposal that an IORP’s remuneration policy should apply to all “outsourced and subsequently re-outsourced key functions”, which would include investment mandates.

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“It will in many cases be impossible for them to ensure service providers publish their remuneration policy,” the paper said.

It also pointed to an article within the revised Directive that required those in charge of the fund to ensure that no risks arose from any outsourcing practices, reducing the need to impose remuneration policies on third parties.

The association also proposed several changes to the REP, recently revised by the Italian presidency to run four pages rather than the initial one, and stressed the need to ensure that the risk-evaluation rules would not be used as a means of imposing the Holistic Balance Sheet (HBS) on the sector.

PensionsEurope said the proposed assessment of climate, resource and environmental risk, one of the issues covered by the initial REP, should be reconsidered due to the difficulty of assessing such new risks.

“More important, a detailed analysis of risks relating to climate change, the use of resources and the environment should only be done by IORPs facing these risks,” the paper added.

The provision has been removed in the latest draft of the Directive.

It also suggested there should be an allowance for multi-employer schemes to conduct an “aggregate” assessment of sponsor solvency, rather than individual assessments for each participating company.

“In addition to the employer, any pension protection scheme needs to be taken into account when evaluating the protection of members and beneficiaries,” it said.

PensionsEurope also questioned whether the Commission’s assurance that the delegated act, meant to provide further details of the REP, would not “impose additional funding requirements”, as the European Insurance and Occupational Pensions Authority (EIOPA) was still working on HBS proposals.

The assurance, alongside proposals for details of the REP to be introduced through a delegated act, has also been removed in the latest IORP draft.

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