EUROPE - The open hearing of the European Economic and Monetary Affairs Committee (EMAC) in Brussels on February 6, brought controversy as a leading European pension fund manager suggested the draft directive of the European Commission had been hijacked by insurance companies and that no directive might be preferable to the one on the table.
Noting the directive’s potential in the pursuit of higher investment returns as a result of lower restrictions, as well as the free choice of investment managers and custodians, Phillip Lambert, global head of pensions and pension fund investments at Anglo-Dutch multinational Unilever, opined: " I have serious doubts that this is the way it is going to pan out and I hope, but am not convinced, that at the end of the day we do not find ourselves in the unfortunate situation where we have to say: better no directive than a bad one."
Lambert claimed that the ‘major obstacle’ lay with the insurance background or liaison of many participants in the legislative process.
Thus, he said, the issue of a level playing field between the Commission’s proposed Institute for Occupational Retirement Provision (IORP) and insurance companies had been: "blown out of all proportion by the well organised insurance lobby."
" The effect of the approach taken in the draft directive would be that the ninety nine per cent of pension funds which will never operate cross border would be subject to a lot of regulation and red tape.
“ It would discourage (smaller) employers from taking the most cost effective ‘funding route, i.e. through pension funds and drive them towards insurance companies."
In a separate presentation to the EMAC committee, Kees van Rees, chairman of the European Federation for Retirement Provision (EFRP), pushed forward once again the argument for qualitative investment rules in the directive, arguing that the quantitative opt-out would dampen employee retirement payouts and undo the thrust of the proposals:
" Restrictions and guarantees cost money. One per cent extra return per annum gives twenty per cent more pension to the average pensioner."
Van Rees also called on the parliament to support the principle of pension funding: " This proposal does not support or create new pension funds."
He added: " It raises too many hurdles to market access."
Consequently, the EFRP suggested that both the requirement for regulatory own funds and the full funding principle should be scrapped.
A full report of the EMAC committee hearing will appear in the March issue of Investment & Pensions Europe Magazine.