6.7.92 NoC169/2 OfficialJournaloftheEuropeanCommunities
OpinionontheproposalforaCouncilDirectiverelatingtothefreedomofmanagementand
investmentoffundsheldbyinstitutionsforretirementprovision
(92/C169/02
On28November1991theCouncildecidedtoconsulttheEconomicandSocialCommittee,
underArticle57(2)oftheTreatyestablishingtheEuropeanEconomicCommunity ,onthe
abovementioned proposal.
TheSectionforIndustry,Commerce,CraftsandServices,whichwasresponsibleforpreparing
theCommittee'sworkonthesubject,adopteditsOpinionon1April1992.TheRapporteur
wasMrPardonandtheCo-Rapporteur MrChevalier.
Atits296thPlenarySession(meetingof29April1992),theEconomicandSocialCommittee
adoptedthefollowingOpinionunanimously .
1.7.DespitethedifficultiesitcallsontheCom­
missiontocontinueitswork,bearinginmindthe
constraintsimposedbythediversityofsystems.
1.8.Theapproachisdifferentfromthatadoptedin
thecaseofcreditinstitutions,insurancecompanies,
collectiveinvestmentundertakingsfortransferable
securities(CIUTSs)andinvestmentfirms,inthatthe
purposeoftheproposedDirectiveisnottoalignthe
lawsoftheMemberStateswithaviewtoapplyingthe
principleof'mutualrecognition'.Thus,evenafterthe
implementation oftheproposedDirective,institutions
forretirementprovisionwillnotbeabletoavailthem­
selvesprovisionallyofa'Europeanpassport',ascan
enterprisesintheaforementioned sectorswhere
nationallawsonaccesstoandexerciseoftheiractivities
havebeensufficientlyaligned.1.ObjectiveoftheDirective
1.1.'Institutionsforretirementprovision'withinthe
meaningofArticle2(a)oftheproposedDirective(see
points2and3.2below)belongintheleadinggroupof
institutional investors .TheirassetsexceedECU800
billions,includingECU483billionsinUKinstitutions
andECU184billionsintheNetherlands .
1.2.TheprovisionsoftheTreatyconcerningthe
freedomtoprovideservicesandthefreemovementof
capitalandtheDirectiveoncapitalmovementsalready
applydirectlytothem.Inotherwords,themainpro­
visionsoftheproposedDirectiveconcernthepractical
applicationofthesefreedomsalreadygranted,inprin­
ciple,bytheTreatyandbysecondarylegislation .
1.3.TheCommissionhasidentifiedthreeobjectives
whichmustbeachievedifthefreedomofservices
andfreemovementofcapitalaretobeimplemented
effectivelyinthecaseofinstitutionsforretirement
provision :
—freedomofcross-borderinvestmentmanagement ,
—freedomofcross-borderinvestment,
—freedomofcross-bordermembershipofsuchinsti­
tutions.
1.4.Underpresentcircumstances theCommission
didnotfeelabletoproposeatextaimedatachieving
thethirdobjective.HencethepurposeoftheDirective
issolelytoimplementthefirsttwoobjectives.
1.5.TheCommitteefullyendorsestheCommission's
aimofimplementing ,throughtheproposedDirective,
thefirsttwoobjectives.
1.6.ItnotesthattheCommission considered
implementation ofthethirdobjectiveimpracticable ;
thiswouldhavefacilitatedthefreemovementofwork­
ersinaccordancewithArticles48etsea.oftheTreaty.1.9.Underthesecircumstances theCommitteecan
onlyurgetheCommissiontocontinueitsworkin
thisarea,withaviewtobringingaboutfreeandfair
competitionwithoutjeopardizingexistingsystems.The
Commissionshould,forexample,takeintoconsider­
ationtheprotectionofbeneficiaries (opportunitiesfor
joining,accumulatedrights,beneficiary'srights,poss­
ibletransfersetc.)andthematchingofcapitaland
commitments ,andassetsandliabilities.
1.10.Thiswillnotbeaneasytaskonaccountof
variousfactors,inparticular :
—thedifferentstructureofsupplementary pension
schemes,
—thesocialaspectsoftheproblem,
—theprudentialaspects,aimedatprotectingtherights
ofthepartiesconcerned :principally,thebenefici­
ariesofsupplementary pensionschemeswhojustifi­
ablylookforsecurity,butalsotheemployerswho
are,inaway,thecustomersoftheinstitutionsfor
retirementprovisionandassuchwanttoseetheir
objectivesachievedassmoothlyaspossible,

6.7.92 OfficialJournaloftheEuropeanCommunities NoC169/3
—thetaxarrangementsapplicabletotheseschemes,
—competitionbetweentheinstitutionsforretirement
provisionand,moregenerally,betweenthevarious
financialinstitutions (creditinstitutions,insurance
companies,investmentfirms,CIUTS),inparticular
compliancewithArticle3(f)oftheTreatywhich
providesfortheinstitutionofasystemensuringthat
competitioninthecommonmarketisnotdistorted.
1.11.TheCommitteeispleasedtonotethatthe
Commission isstillworkingactivelyonthismatter
asithassentaCommunication totheCouncilon
Supplementary SocialSecuritySchemes:TheRoleof
OccupationalPensionSchemesintheSocialProtection
ofWorkersandtheirImplicationsforFreedomof
Movement [doc.SEC(91)1332finalof22July1991].
TheCommitteewouldrefertoitsOpiniononthis
Communication .3.Examination ofindividualArticles
3.1.Article1(2)
3.1.1.Nodoubttheseinstitutionsarenotcovered
becausetheyalreadybenefit—orwillbenefitwhenthe
relevantDirectivesareadopted—notonlyfromfree­
domofcross-borderinvestmentmanagementandfree­
domofcross-borderinvestment,butalsofromfull
exerciseoftherightofestablishmentandthefreedom
toprovideservices.
Thetextcouldbemademorespecificonthispoint.
3.2.Article2(a)
3.2.1.Aparticularfeatureofinstitutionsforretire­
mentprovisionisthattheirpurposeistofinanceretire­
mentbenefitstoa'groupofpersonsdefinedbyan
occupationalorprofessionalorsimilarrelationship'.
Suchinstitutionsmayalsocarryoutthistaskfora
'groupofundertakings'[seeArt.3(2)].
3.2.2.TheCommitteealsotakesthistomeanthat
institutionsforretirementprovisionmaycarryoutthe
taskforspecificsectorsorforagroupofpersons
definedbytheexerciseofaself-employedactivity,as
forexampleagroupofpersonsexercisingaparticular
professionorcommercialactivity.
Inshort,thedefinitionmustincludegrouppension
institutions .
3.2.3.Rightlytheproposalmakesnodistinction
accordingtowhethermembershipisoptionalorcom­
pulsoryunderthelawsorspecialregulationsofthe
individualMemberState.
3.2.4.Rightlytheproposalmakesnodistinction
accordingtowhethertheinstitutionoperatesonafully
fundedorpay-as-you-gobasis,subjecttothecomments
onthispointin2.3above,thusleavingcompletefree­
domtotheMemberStates.
3.2.5.AgainquiterightlytheDirectivedoesnotlegis­
lateonthemethodofoperationoftheinstitution,thus
leavingcompletefreedomtotheMemberStates.
3.2.6.Finally,theDirectiverightlymakesnodistinc­
tionaccordingtothecharacteroftheinstitutions,
whethertheycomeunderprivateorpubliclaworhave
amixedcharacter.
3.3.Article2(b)
3.3.1.Retirementbenefitsconsistofmeetingtheliab­
ilitiesforaslongasthepensionerlives.2.ThesubjectoftheDirective
2.1.ThesubjectoftheDirectiveis'institutionsfor
retirementprovision'asdefinedinArticle2(a)(see
point3.2below).
2.2.Wherepensionliabilitiesarecoveredbybook
reservesinanemployer'sbalancesheet,thereisno
institutionforretirementprovisionwithinthemeaning
ofthedefinitionandtheDirectivedoesnotapply.
TheCommitteeapprovesthissolution.
2.2.1.Inthiscase,anyMemberStatewhichpermits
theadoptionofsuchasystemshouldmaketheforma­
tionofadequatereservesintheemployer'sbalance
sheetobligatory .
2.3.Thesameargument(see2.2)applieswithregard
topay-as-you-gosystemsunderwhichpensionsarepaid
directlyfromcontributionincome(andmembershipis
compulsory).TheDirectivedoesnotapplyhereeither,
exceptwherereservesarebuiltupandinvestedin
financialassets.Inthecaseofsuchreservesaninsti­
tutionforretirementprovisionisdeemedtoexistwhich
may,inrespectofthesereserves,availitselfofthe
Directiveandbenefitfromfreedomofcross-border
investmentmanagementandcross-borderinvestment.
TheCommitteeapprovesthissolution.
2.4.Theproposalpermits,butdoesnotrequire,use
ofaninvestmentmanagerandacustodian.
TheCommitteeapprovesthissolution.

NoC169/4 6.7.92 OfficialJournaloftheEuropeanCommunities
generalcasereferredtoin3.2.2,wherethereisno
employertopaycontributions as'sponsoringunder­
taking'.Supplementary benefitsmayincludecoveragainstacci­
dentaldeath,disabilityandcessationofemployment
andsupportpaymentsintheeventofsicknessorpov­
erty.
TheCommitteeapprovesthisapproach.3.5.Article3(1)
3.3.2.Thebenefitsmayconsistofadutytoachieve
agivenresult,whereaspecificresultisguaranteedin
returnforspecificpayments.3.5.1.Thesolepurposeofthisprovisionistorequire
theMemberStates,wheretheypermittheexternal
managementoftheinvestmentsofcertainformsof
institutionforretirementprovision,nottorestrictthe
freedomofsuchinstitutionstochoose,asinvestment
manager,aninsurancecompany,acreditinstitutionor
afinancialservicesinstitutionestablishedinanother
MemberStatewheretheyaredulyauthorizedtoexer­
cisethisactivity.
TheCommitteeapprovesthisprovision.3.3.3.Theymayalsoconsistofadutytoemploy
certainmeans,wheretheinstitutionforretirementpro­
visionundertakestomanagethefundsentrustedtoit
tothebestofitsabilitywithaviewtocarryingoutthe
retirementplan.
TheCommitteeapprovesthisapproach.
3.3.4.Thebenefitsmaytaketheformofapension
oralumpsum.
TheCommitteeapprovesthisapproach.3.5.2.Alloperatorsabletoactinthecapacityof
managersmustbeabletoperformthisfunctionunder
equalconditionsofcompetition .Thus,insurancecom­
paniesmustbeabletoperformthisactivityoff-balance
sheet,i.e.withoutincurringanyaccountingobligations
differentfromthoseapplicabletomanagersotherthan
insurancecompanies;thustheywouldnotbesubject
toa1%solvencymargin[cf.Art.19(e)ofthefirst
Directiveof5March1979,79/267/EEC]as,inthiscase,
theinsurancecompany,likeotheroperators,doesnot
bearaninvestmentrisk.3.3.5.Initsfuturework(seepoints1.9,1.10,and
1.11above)theCommissionmusttakeintoconsider­
ationthefactthatsupplementary guaranteescovering
riskslinkedwiththedurationofthehumanlifeshould
bemadeinaccordancewithappropriateprudential
rules,takingaccountofthenatureofthecommitments
enteredinto.
Retirementbenefitspropershouldbedefinedaccording
totheirnature,characteristics andconditionsofavail­
ability:predeterminedcontributionsorbenefits,poss­
iblyinconjunctionwithguarantees,e.g.aminimum
interestrate.
Intheinterestsofbeneficiariesandwithaviewto
equalconditionsofcompetitionbetweenoperators,the
Commissionshouldensurethatwhensupplementary
guaranteesasreferredtointhefirstparagraphabove
areoffered,allthepartiesinvolvedobservesimilar
prudentialrulestoensurethefinancialsecurityoftrans­
actions.3.6.Article3(2)
Underthisprovisioninstitutionsforretirementpro­
visionareallowedtoorganizethemanagementoftheir
investmentsonagroupbasis.
TheCommitteeapprovesthisprovision.
Asimilarprovisionshouldapplytotheholdingof
assets,i.e.itshouldbepossibletoholdthemonagroup
basisandchoosefreelywhoistomanagethem.
3.7.Article3(3)
3.4.Article2(c)
Theterm'sponsoringundertaking'doesnotseem
entirelyadequateinallthesituationsreferredtoabove
(e.g.point3.2.2).
Thedefinitionshouldberevisedtocoverthemany
situationswherethereisno'sponsoringundertaking',
forinstancewherethelatterdefaultsor,inthemore3.7.1.Thesolepurposeofthisprovisionistorequire
theMemberStates,wheretheypermitorrequirethat
theassetsofaninstitutionforretirementprovisionbe
heldbyacustodian,nottorestrictthefreedomofsuch
institutionstochoose,ascustodian,acreditinstitution
orafinancialservicesinstitutionestablishedinanother
MemberStatewheretheyaredulyauthorizedforthis
typeofactivity,oranauthorizeddepositaryinaccord­
ancewiththeCIUTSDirective {cf.inparticularArt.8
ofDirective85/611/EEC).Insurancecompaniesshould
beincludedinthelistofdepositaries .

6.7.92 OfficialJournaloftheEuropeanCommunities NoC169/5
couldbeinterpreted—wronglyintheCommittee's
opinion—tomeanthattheymaysetmaximumrequire­
ments.Settingmaximums,however,impliestheimpo­
sitionofminimumsforthosecategoriesofassetsnot
subjecttomaximums .
Thetextshouldbedraftedinsuchawaythatitisclear
thattheMemberStatesmaynotrequireinstitutionsfor
investmentprovisiontoinvest,ornotinvest,allor
someoftheirassetsinparticularcategoriesofassetsor
tolocalizeallorsomeoftheirassetsinaparticular
MemberState.
3.9.2.Theterm'assets'mustbeunderstoodinthe
broadestsense.Itcomprisesallsecuritiesandallfinan­
cialinstruments,whatevertheirform,nature,duration
andinwhatevercurrencytheyareexpressed.'Assets'
alsoincludesallmonetarydeposits,whatevertheirterm
orcurrency .
3.10.Article4(3)3.8.Article4(1)
3.8.1.Theproposalliststhewell-knownbasicrules
whichmustgoverntheinvestmentoftheassetsof
institutionsforretirementprovision.Suchassetsmust
beinvestedwiththecare,skill,prudenceanddiligence
whichagoodprofessional ,thoroughlyfamiliarwith
suchmatters,woulduseinthepursuitofsuchan
activity.
3.8.2.BearinginmindtheobjectiveoftheDirective,
theCommitteeconsidersthattheprudentialruleslisted
arenecessary.Theymustberespectedifpensionsare
tobesafeguarded .
3.8.2.1.Itshouldbepointedoutthatinstitutionsfor
retirementprovisionandanymanagersandcustodians
theymightusemustactexclusivelyintheinterestsof
thebeneficiariesoftheservicesofsuchinstitutions .
3.8.2.2.Accordingly ,Article4(l)(c)shouldincorpor­
atethewordingofthesixthclauseofthepreambleto
theeffectthat'noinvestmentshouldbemadeforthe
particularinterestofanysuchdirectorsortrusteesor
oftheirdelegates,norshouldanyinvestmentbemade
topursuesolelytheinterestsoftheundertakingor
undertakingswhichsponsortheinstitution'.
3.8.2.3.Similarly,theCommitteehasconsiderable
misgivingsaboutallowinganyinvestment,inwhatever
form,evenif'restrictedtoaprudentlevel',inthe
sponsoringundertakingorundertakings .
3.8.3.Personsreceivingretirementbenefitsmust
haveaccesstoallrelevantinformationconcerning,in
particular,thetypeofassetsheldandtheirsolidity,the
managementpolicy,theidentityandqualificationsof
themanagersandcustodians .
3.8.4.Undernocircumstances mayanyinsolvency
insuranceorStateguaranteesasreferredtointhefinal
paragraphofArticle4(1)permitthebasicprinciplesof
assetinvestmentlistedinArticle4(1)tobewaived.
Thisshouldbespeltoutinthetext.
3.8.5.TheDirectiveshouldbeinterpretedtomean
thatMemberStateswhichsowishmaypermitthe
setting-upofpensionfundssubjecttolessstrictrules,
especiallywithregardtoArticle4(1)(c)wherethesole
beneficiariesaretheownersormanagersofthespon­
soringundertaking .
3.9.Article4(2)
3.9.1.ThisprovisionprohibitstheMemberStates
fromsettingminimuminvestmentrequirements .It3.10.1.Thecurrencymatchingruleshouldbe
dropped:
—underthecloakofaruleofgoodmanagement ,its
effect,itsobjectiveeven,istofavouranational
marketandinparticulartheissueofGovernment
loans.Thisideaisunacceptableinthelightofthe
goalofasinglemarketandtheprogressmade
towardsit,
—itmayhavetheoppositeeffecttogoodmanagement ,
ifitcompelsassetstobeplacedinadepreciating
currencytothedetrimentofinvestmentsinastable
currency,
—itcouldcomeupagainstthelimitationsofsome
markets,especiallyinMemberStateswherethe
marketsaresmaller,
—itreintroduces ,indirectly,alocalizationrulewhile
thisisprohibitedunderArticle4(2),
—itconstitutesabarriertothefreemovementof
capital.
ToregardonlytheECUasmatchinganyparticular
currencyintheCommunityisnotasolutionsince:
—theECUmaybeunstableinrelationtosomecur­
renciesintheeventofrealignments ,
—atpresentthemarketinECU-denominated shares
isstilltoolimited.

NoC169/6 OfficialJournaloftheEuropeanCommunities 6.7.92
theliberalizationoftherighttoinvestthereservesof
institutionsforretirementprovisioninforeignsecurities
issuedinotherMemberStates.
4.2.Itspurposeisalsotopermit,wherenational
lawsallowtheemploymentofamanagerandacustod­
ian,theuseofamanagerorcustodianestablishedin
anotherMemberState.
4.3.Fortherest,theproposedDirectiveimposes
nothingandprohibitsnothing.
4.4.Subjecttotheprecedinggeneralandspecific
commentstheCommitteeapprovestheCommission's
twinobjectives.
4.5.IturgestheCommissiontocontinuetowork
towardstheeffectiveimplementation oftherights
enshrinedintheTreaty,namelythefreedomofestab­
lishmentandthefreedomtoprovideservices,whilst
respectingthefundamentalprincipleoffreedomof
competitionandequalityofeconomicoperatorswith
regardtocompetition .3.11.Article4(4)
3.11.1.TheCommitteeapprovesthisprovision.
3.12.Article4(5)
3.12.1.Withthisprovisionthereisariskthatthe
MemberStatescouldmaketheapplicationoftheprin­
cipleslistedinArticle4(1)to(4)morestringent(see
3.9.1inparticular).
ItisfortheCommissiontoproposeatextavoiding
suchasituationarising.
3.13.Article5.2
3.13.1.ItisnotacceptableforMemberStatesto
havetocommunicate onlywhattheyregardasthe
'main'laws,regulationsoradministrative provisions
whichtheyadopt.
4.Conclusions
4.1.TheaimoftheDirective,inthecontextofthe
liberalizationofcapitalmovements,istoencourage
DoneatBrussels,29April1992.
TheChairman
oftheEconomicandSocialCommittee
MichaelGEUENICH