European-level changes
[ch 6: pages 86-87]On 27 March 2014 the European Commission adopted a legislative proposal for new rules on occupational pension funds (known as institutions for occupational retirement provision or IORPs). The proposal aims at improving governance and transparency of these funds in Europe, promoting cross-border activity, and helping long-term investment.
However, serious concerns about the Directive have been expressed by the TUC, the CBI employers’ organisation and the National Association of Pensions Funds (NAPF) which support better governance and communications, but argue for a less prescriptive approach, with more flexibility for implementation in a way that recognises the huge variety in national pension systems.
Directive 2003/41/EC (the original IORP Directive) lays down basic requirements for occupational pension funds and their supervision, including rules which oblige occupational pension funds to invest their assets prudently, in the best interest of members and beneficiaries. It also aims to provide the conditions under which a single market for occupational pension services could start developing.
The Commission argues that the need for change (an IROP2 directive) is being driven by the decline of DB schemes and a growth of DC occupational pension funds where the investment risk is borne by the member, with no guaranteed pay-out: “Therefore, governance and transparency of information rules are especially important for defined contribution schemes”. Ageing populations and an increasing recognition of the need for long-term investment in Europe’s economy also point to the need for change.