Changes aimed at relaxing full funding requirements within the revised IORP Directive risks capturing all pension schemes undergoing mergers or restructuring, the National Association of Pension Funds has warned.
James Walsh, EU policy lead at the UK trade association, said that while he was supportive of any attempt to reform funding requirements for cross-border funds, wording contained within a report by MEP Brian Hayes could impact any existing scheme making material changes.
Hayes, the rapporteur within the European Parliament’s Economic and Monetary Affairs committee (ECON) responsible for the Directive, released his draft report that erased mention of cross-border activities from a clause on funding arrangements.
Where the European Commission’s proposed draft said cross-border funds should be fully funded, the version proposed by Hayes states that the fund’s technical provisions should be fully funded “from the moment when the institution starts operating a new or additional scheme”.
Walsh questioned what would constitute a new fund launch.
“If you’ve got some company merger or restructuring, then very often that would involve setting up a new scheme – maybe as a reconfiguring of existing schemes,” he said.
“If you change the scheme rules, perhaps because of a change in benefits or contributions, does that constitute a new scheme?
“It’s a question for lawyers, but you could make the case that it constitutes a new scheme.”
Walsh said there was otherwise “plenty” for the NAPF to welcome in the Irish MEP’s report, which is yet to be amended by other ECON members.
He also praised the changes suggested to the Pension Benefit Statement (PBS), for which the Commission has previously proposed a list of prescriptive rules, including a maximum length.
Instead, Hayes included several high-level principles and asked for an exchange of best practice between schemes on how best to present the information.
“There’s a lot of helpful simplifications, such as greater freedoms for member states, but there are some points where there’s some serious work still to do,” Walsh said.
An area he identified as needing work was Hayes’s silence on depositories for defined contribution (DC) funds.
Previous amendments proposed by member states during negotiations at Council of the EU level removed the requirement for DC funds to employ a depository where the assets were otherwise protected, but Hayes did not address the issue.