The EU’s Institutions for Occupational Retirement Provision (IORP) directive on cross-border schemes was a serious attempt at creating the conditions for a single pan-European market for occupational pensions. Despite implementation in 2005, these schemes have been slow to materialise.

In Ireland, 21 schemes have so far applied for authorisation and approval. These were all the result of pre-existing schemes, mainly UK-Ireland schemes, which already had employees in both jurisdictions.
Prior to the EU directive, these schemes operated under mutual arrangements between the two countries.

When the directive came into force they had the choice of either discontinuing and dismantling the arrangements and setting up individual schemes in each country, or leaving the arrangements as they were. Doing nothing means they automatically become cross-border schemes under the IORP directive and would be subject to its requirements. They also needed to register.

“With the exception of one very small existing scheme between Belgium and Ireland, we have only had applications from UK-Ireland schemes,” says Mary Hutch, head of information and training at the Pensions Board, the Irish regulator. “We have yet to receive applications from other EU member states or an Irish scheme that is taking contributions from another member state other than the UK. So for us right now it is not brand new business but rather a continuation of a pre-existing situation.”

In the UK, the situation is slightly more diversified. According to the UK pensions regulator, 25 schemes have so far gained authorisation and approval to operate cross-border. The UK is also host to 19 cross-border schemes that have a home regulator in another EU state. As both home and host, its schemes cover a range of states including Belgium, France, Greece, Ireland, Italy, Luxembourg, the Netherlands, Poland, Spain and Sweden, according to the regulator.

As part of the cross-border arrangements, pension trustees, acting in the interests of their members, must decide whether to seek cross-border approval or to set up separate schemes in the two countries concerned. In the case of cross-border, they must also decide the host and home country.

The home member state is the country in which the pension plan’s main administration is located, while the host member state is the state whose social and labour law relevant to pension applies to the relationship between the employer and member.

In Germany, the number of registered cross-border pension schemes is considerably smaller than in the UK and Ireland. The German pensions regulator, BaFin, says that four pension funds from other EU countries - three from the UK and one from Luxembourg - have agreed cross-border pension schemes with a German employer, while two German Pensionskassen have arranged such schemes in other European countries. They all registered in 2006.

Foreign companies that have agreed a pension plan and signed a contract with a German company have to notify BaFin according to the VAG law 118e.


Belgium’s CBFA regulator recently received three notifications from schemes abroad that registered Belgium as the host member state. The three cross-border schemes, or IORPs, are the Philips International Pension Fund with Luxembourg as its home country, the VF Corporation UK Pension Plan based in the UK and the Irish Business and Employers Confederation Pension Plan, based in Ireland. But schemes have yet to register Belgium as a home member state.

The CBFA puts this down to the fact that the Belgian law, which implements the IORP directive into
national legislation, only came into force on 1 January. “We have been contacted by several companies within and outside Europe that are looking to create an IORP, so we will hopefully receive the first application soon,” says spokesman Luk van Eylen.

“We expect plenty of companies to register Belgium as a home member state because the country has a very interesting regime for foreign companies wanting to set up or bring together all their pension fund business. Belgium embraces a pan-European view and pension funds operating via the Belgian Organisation for Financing Pensions (OFP) structure, which came into force in 2006, enjoy the EET tax regime. The OFP vehicle can avoid taxation at all or at least partly on income originating from foreign investments,” he continues.

For existing cross-border arrangements, Belgian law provides a four-month transitional period, which means that IORPs can still notify the CBFA of their cross-border activities up until 1 May.


Pension schemes wanting to work cross-border must submit an application form to the home member state regulator and wait for authorisation and approval. The trustees or board members of an IORP are not allowed to accept contributions from employers employing members who are subject to the social and labour law of another EU member state until authorisation has been granted. And host member states must ensure that their country’s social and labour law, and disclosure of information requirements, are met in the overseas scheme.

Eligibility is determined by the IORP directive as transposed in the relevant legislation and in the cross-border regulations of the member states. The directive states that on top of having to have a structure and organisation in place adapted to internal activities, cross-border schemes or IORPs also need to be fully funded.

They need to gain authorisation only once, but will need to complete the approval process each time a scheme wants to operate in an additional country, or take contributions from an additional EU employer.

In the case of existing UK-Ireland schemes, they had to apply for authorisation and approval in order to continue operating cross-border. However, they were able to continue to collect contributions during that process in view of that fact that they pre-dated the directive and that there was a lack of clarity as to whether they were considered cross-border, says Hutch.

“We waited a while for clarification from the EU Commission as to whether the existing UK-Ireland schemes actually fell within the scope of the cross-border provisions of the directive. When we got confirmation that they did, we asked schemes to let us know by December 2005 if their Irish registered scheme had UK members. And by doing this, they informed us which other schemes needed to get authorisation and approval, and we would advise them of the appropriate steps to take,” she adds.

“Some pension schemes opted out, as they didn’t want to become cross-border and preferred to set up two separate schemes for Irish and UK employees. This could be because one of the requirements of cross-border schemes is that they must be fully funded at all times. The commission explained that if they weren’t absolutely fully funded from day one, they would have to have a robust recovery plan in place, showing when they would be fully funded. Consequently, schemes may try to set up in a jurisdiction with the most lenient regulatory framework.”

Hutch adds: “We haven’t seen any more applications for cross-border business since the directive was
transposed and it is widely expected to be a slow process, although the early IORP-adopter Ireland has often been referred to as the location of choice for cross-border investments due to its good pensions infrastructure and regulatory model, as well as its common contractual fund. I think that everyone’s waiting for somebody to take the lead.”

But Jacqueline Lommen, specialist on European pensions in the policy department of Dutch supervisor DNB and member of CEIOPS, says a handful of new cross-border schemes that combine local pension schemes in various countries within one IORP have already been created. She says that around 30 cross-border cases exist in Europe, with the large majority resulting from cross-border activity - mainly UK-Ireland arrangements - that already existed before the introduction of the pensions directive.

She says: “The IORP directive has been a catalyst for change and a number of cross-border IORPS have been introduced lately. I’m very happy to see a handful of plain vanilla cases already, as we can’t count
cross-border schemes that have derived from earlier cross-border activity. The way forward is to look at the new schemes.”