COMMISSION OPINION pursuant to point (c) of the third subparagraph of Article 251(2) of the EC Treaty on the amendments made by the European Parliament to the common position of the Council on the proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the activities and supervision of institutions for occupational retirement provision (presented by the Commission pursuant to Article 250 (2) of the EC Treaty)

2000/0260 (COD)

COMMISSION OPINION pursuant to point (c) of the third subparagraph of Article 251(2) of the EC Treaty on the amendments made by the European Parliament to the common position of the Council on the proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the activities and supervision of institutions for occupational retirement provision

1. Introduction

Point (c) of the third subparagraph of Article 251(2) of the EC Treaty stipulates that the Commission must deliver an opinion on amendments proposed by Parliament on second reading. Below is the Commission's opinion on the thirteen amendments proposed by Parliament.

2. Background

Commission proposal transmitted to Parliament and the Council on (document COM(2000)507 final - 2000/0260 (COD)) // 13 November 2000 (OJ C 96/E, 27.3.2001)

Economic and Social Committee opinion delivered on // 28 March 2001 (OJ C 155, 29.5.2001)

Parliament opinion (first reading) delivered on // 4 July 2001 (OJ C 65 E, 14.3.2002)

Common position adopted on // 5 November 2002

Commission communication on the Council's common position presented on // 14 November 2002

Parliament opinion (second reading) delivered on // 12 March 2003

3. Purpose of the proposal

The Lisbon European Council issued a forceful reminder of the need to complete integration of financial markets in the Union. This includes full implementation of the Financial Services Action Plan [1] by 2005. Coordination of the rules applicable to institutions for occupational retirement provision (IORPs), which currently lack an appropriate Community framework, is a central plank of the Action Plan. These institutions must be able to carry out their activities securely within the internal market, for the benefit of firms and workers who require their services to manage their retirement savings.

[1] COM (1999) 232.

In drawing up the proposal for a Directive, the Commission paid careful attention to two issues: security and efficiency. It is vital to ensure a very high standard of protection for the income of future pensioners. But IORPs must also be efficient, particularly as regards investments and cross-border transactions. Insufficient protection is a threat to retirement benefits. Inefficiency increases the cost of saving, to the detriment of the competitiveness of firms and the financial balance of pension schemes. Consequently, the proposal for a Directive contains:

- Strict prudential rules to protect beneficiaries. IORPs must be subject to detailed rules of operation. Members and beneficiaries must be properly informed of the terms of the scheme, the financial situation of the institution and their rights. Benefits promised must be calculated prudently and be covered by sufficient assets. If an IORP offers any financial guarantees, it must hold own funds. Lastly, the supervisory authorities must have the necessary powers to monitor adequately the IORPs for which they are responsible.

- Investment rules tailored to the characteristics of IORPs and geared towards effective savings management. IORPs invest on a very-long term basis and can predict with relative ease the amount of benefits they will have to pay out. They should, therefore, be allowed a certain amount of freedom in determining the investment policy which best suits their commitments. They should, in any event, ensure that their assets are fairly widely spread. Member States may, if necessary, lay down more detailed rules for supervision of the institutions within their territory. However, such rules should not interfere excessively with the international diversification of investment portfolios and investments in shares, which generally offer high long-term returns and satisfactory security.

- Rules enabling cross-border (and, consequently, more efficient) management of occupational pension schemes. At present, it is impossible for an IORP to manage a pension scheme for a company located in another Member State. A firm which has offices in the fifteen Member States must set up fifteen different schemes. Substantial economies of scale could be achieved if one institution managed all the schemes, while respecting local social and labour law requirements. This would necessitate mutual recognition of supervisory regimes, which is one of the key objectives of the proposal. The proposal also provides for a cooperation procedure between supervisory authorities where occupational schemes are managed on a cross-border basis.

4. Commission opinion on parliament's amendments

4.1. Amendments taken up by the Commission

* Parliament adopted on second reading thirteen amendments to the common position. They clarify certain provisions but do not jeopardise the scope of the common position or misinterpret the objectives pursued by it.

*

* The amendments are as follows:

Amendment No // Provision of the common position

25 // New recital 4a. Addition of a recital underscoring the role that institutions for occupational retirement provision can play in the organisation of retirement schemes.

26 // Recital 11. It proposes that the Commission monitor the situation in the occupational pensions market and assess the possibility of extending the optional application of the Directive to institutions other than life-assurance companies.

27 // New recital 11a. It stresses that, where their common objective is to ensure financial protection, retirement benefits should be in the form of a lifelong pension, without prejudice to other forms of payment.

28 // New recital 11b. It underscores the importance of appropriate cover for biometrical risks in the fight against poverty and stresses that consideration should be given to providing such cover when a pension scheme is being set up.

29 // Recital 17. It emphasises that the institutions not only provide a financial service but also bear a heavy responsibility for the provision of occupational retirement benefits.

30 // Recital 37. It stresses the importance of sound cooperation between competent authorities and announces the Commission's intention to set up a committee of supervisors.

31 // Article 6(d). It stresses that, where their purpose is to provide financial protection, retirement benefits generally should be paid out in the form of a lifetime payment. However, it also retains the possibility for the payment to be made for a temporary period or as a lump sum.

32 // Article 9(1)(a). It proposes the establishment of a register listing all registered institutions and indicating, where appropriate, the Member States in which they operate.

33 // New Article 9(1a). It stipulates that Member States have the right to ensure that, in the case of agreement between employers and employees, cover for biometrical risks is offered to members.

34 // Article 11(4). It adds to the list of information the right of members to receive on request the arrangements relating to the transfer of pension rights in the event of termination of employment.

It requires the institutions to send to their members each year brief particulars on the (financial) situation of the institution and on the current level of individual entitlements.

35 // Article 21. It deletes from Article 21 the reference to the Insurance and Pension Committee, which does not yet exist.

It shortens to four years the period within which the reports are to be produced.

36 // Article 15(6). It deletes the reference to the Insurance and Pensions Committee in this Article.

37 // Article 16(2)(c). It requires institutions, in the event of a transfer of assets following termination of a scheme, to inform the competent authorities accordingly and to provide members with a general outline of the transfer procedure.

5. Conclusion

Pursuant to Article 250(2) of the EC Treaty, the Commission amends its proposal in the manner indicated above.