Managers of European pension funds have widely differing views about the directive on pension funds.
The range of opinions on the directive – Institutions for Occupational Retirement Provision – vary from those who see it as a major opportunity to those who fear a potential catastrophe.
“The implementation of the EU pensions directive should be viewed as a significant opportunity,” says Vitor Sequeira, executive board member at Previsão SGFP, the pension fund of Portugal Telecom's pension fund operator.
“Any effort to create a single market for the industry is welcomed. It’s good not only for managers, but also for sponsors and pension beneficiaries who most certainly will profit from an increasingly efficient market.”
Towards the other end of the spectrum is Richard Barlow of the UK’s Electricity Supply Pension Scheme, who fears the directive’s unintended consequences. “We’ve looked at that very carefully,” he says.
“Our view is that when you look at it carefully it is by no means clear. We have considerable worries.”
He sees potentially “quite catastrophic” consequences of the directive. “The wording contains numerous potential constraints on investment – it’s by no means crystal clear. For example, the constraints on borrowing could hit underlying investments such as hedge funds. It wasn’t the directive’s intention to stop borrowing like this.”
Elsewhere, there are concerns about the directive’s impact on communications. Günther Schiendl, head of investments at Autsria’s APK Pensioskasse, says: “The implementation of the EU pensions directive, which makes necessary good communications with the regulator. The opt-out is certainly affecting us.
“At the very beginning it involves a lot of communication and explanation, I think we will see a partial opting out, and generally the better informed the decision makers are the more likely they are to opt out. That’s because they see the long-term costs of the associated guarantee and then there is a connection between the prudent person rule coming into effect via the EU pensions directive and the opting out. This means that if the plan members decide not to opt out of the minimum guarantee then on their plan no prudent person rule can be implemented.”
Pensions taxation is also seen as an issue. The directive “appears to be a bit empty because if they want to make a single European pensions market they first would have to harmonise the fiscal aspect in every country,” says Andrea Giradelli, operations director at Italian chemicals industry scheme Fonchim.
Giradelli welcomed the new prudent person stipulation in the directive. He said it may be “liberating”.
“The introduction of the prudent person principal may be liberating with regard to our stringent conflict of interest regulations.
“Since the financial industry and financial products change every five minutes, too strict a system of regulations risks preventing a good fund manager producing the best results for the members.”