COMMISSION OF THE EUROPEAN COMMUNITIES 
C0MC91) 301 final - SYN 363 
Brussels, 12 November 1991 
Proposal for a 
COUNCIL DIRECTIVE 
relating to the freedom of management and investment of funds 
held by institutions for retirement provision 
(presented by the Commission) 
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EXPLANATORY MEMORANDUM 
l. INTRODUCTION - 6ENERAL CONSIDERATIONS 
A number of matters have combined in recent years to make retirement 
provision the subject of much interest and debate. 
Perhaps the most important of these matters is the effect of social and 
demographic changes, common to almost all Member States of the Community, 
which are likely to result in a significant increase in the ratio of 
retired people to working people over the next 20-30 years. Whilst this 
proposal for a directive does not directly address these developments, it 
is nevertheless against this background that it must be seen. 
At the same time developments within the Community and progress towards the 
Single Market, particularly the adoption of the Capital Movements Directive 
(88/361/EEC) and the 2nd Life Assurance Directive (90/619/EEC), have 
highlighted various problems that exist in occupational retirement 
provision at a European level. 
Institutions for retirement provision and their members do have various 
rights which can be derived directly from the treaty or from existing 
legislation. Although there is relatively little legislation at Community 
level which refers specifically to such institutions, the treaty provisions 
on freedom of services and free movement of capital, together with the 
Capital Movements Directive are of course of direct relevance to them. 
The various directives relative to other financial institutions are also of 
indirect relevance in that these institutions offer services to 
institutions for retirement provision, particularly the services of 
investment management and custody of assets. 
Some comparison with the provisions of these directives is also inevitable 
in that the benefits provided by institutions for retirement provision 
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can also often be provided by other financial institutions, particularly 
life assurance companies. 
The main provisions of this proposal for a directive are concerned with the 
effective application of the rights which in principle are already 
guaranteed by the treaty and existing legislation. 
In addressing the problems which exist at Community level, the 
Commission's services have identified three principal objectives which were 
outlined- and developed in a working paper issued to Member States in 
October 1990 and discussed subsequently in a series of consultation 
meetings with Member States' experts. These objectives aim to implement 
effectively the Treaty given freedoms of services and capital movements for 
institutions for retirement provision. They have been discussed under the 
headings of: 
- freedom of cross-border investment management 
- freedom of cross-border investment 
- freedom of cross-border membership of such institutions. 
These objectives themselves are simply the expression of the treaty 
principles of freedom of services and free movement of capital. However 
discussion of them has highlighted a number of practical problems, 
particularly in the application of the third objective above which however 
can in no way restrict the underlying Treaty given freedoms. 
Systems of retirement provision have developed over many years and in very 
different ways in the different Member States of the Community. 
This is seen most clearly in the different proportions of retirement income 
that come through state, occupational or individual provision, through 
funded or pay-as-you-go provision, through publicly or privately 
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administered provision, and through compulsory or voluntary provision. 
Occupational provision may be organised by individual employers or on a 
sectoral basis. A similar variety exists as regards the ways of 
establishing occupational retirement schemes. They may be set up by 
collective agreements, by single employers, groups or others. 
These differences are deeply rooted in national cultures and economic 
systems and no harmonisation at Community level is either necessary or 
desirable. 
In particular it is not necessary to harmonise the levels of benefit that 
are provided either by individual components of retirement income or by the 
system as a whole. Community action must be carefully judged so as not to 
upset or distort the equilibrium which has been established at national 
level. Indeed the Commission in its document SEC(91)500 'Initial 
Contributions by the Commission to the Inter-Governmental Conference on 
Political Union' draws attention to the fact that there is no question of a 
general harmonisation of the existing systems. It may also be noted that 
the Inter-Governmental Conference is considering the decision-making 
process for Article 51 of the treaty. 
There are however a number of cross-border aspects of retirement provision 
which can significantly impede the realisation of the fundamental freedoms 
of the Community treaties. 
As the single market develops, companies increasingly organise their 
business operations on a trans-national basis, employing staff resident in 
more than one Member State, and this can only be expected to increase with 
closer economic integration. This inevitably focuses attention on the many 
difficulties in organising occupational retirement provision on a 
consistent basis both from the point of view of workers and companies, 
including many small companies, for instance operating in border areas. 
These difficulties are most immediately apparent in the case of migrant 
workers who have worked in more than one Member State and particularly if 
they have done so whilst remaining with the same employer, or more 
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generally within the same group. In such cases it is often impossible to 
organise their retirement provision in a consistent and tax-efficient 
manner, and this can constitute a significant barrier to the free movement 
of workers. Such problems in the area of institutions for retirement 
provision have also been highlighted by progress towards the single market 
in the area of life assurance and particularly by the adoption of the 2nd 
Life Assurance Directive (90/619/EEC) which included group life assurance 
contracts within its scope. Such contracts are often used for the 
provision of pension benefits and it will thus become possible for 
occupational pension benefits to be provided across national borders by 
means of life assurance contracts. The Commission has also taken action 
under article 169 of the treaty to remove fiscal barriers to such 
provision. The alternative, often more direct, provision through an 
institution for retirement provision however remains extremely difficult 
and there should be equal opportunities for these alternative methods of 
financing. The diversity of national systems for financing retirement 
provision poses many practical problems in this respect. 
Despite these various problems, it should be emphasised that institutions 
for retirement provision and their members are not without rights, which in 
many cases can be derived directly from the treaty or from existing 
legislation. Measures to remove the remaining barriers are not included 
within this proposal for a directive, but the Commission is currently 
reviewing these problems with the intention of bringing forward further 
proposals or taking further action in due course, in order to facilitate 
the free movement of persons and services. In this respect the Commission 
has already adopted on the 17th July 1991 a Communication to the Council on 
the rôle of occupational pension schemes in the social protection of 
workers and their implications for freedom of movement. This proposal is 
consistent with that communication and any further proposals would of 
course also be so. 
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There is strong pressure from consumer organisations for further proposals 
which would give greater freedom for consumers. From their point of view 
the current proposal may be considered unbalanced in facilitating the 
exercise of certain freedoms for institutions, without providing any 
freedoms for consumers (in the sense of members or beneficiaries of these 
institutions) to remain within a single scheme while exercising their 
freedom to work in different Member States. This needs to be balanced, 
however, against the need to ensure that any future proposals do not call 
into question compulsory supplementary pension schemes operating on a pay-
as-you-go basis fulfilling a 'social solidarity' function. 
At this stage the practical problems related to the objective of cross-
border membership require further study before any additional legislation 
could be proposed. This proposal for a directive therefore deals 
essentially with the aspect of institutions for retirement provision as 
financial institutions, in other words with the first two of the three 
objectives outlined above, and not with the third objective. Indeed such 
institutions represent some of the largest financial institutions within 
the Community in terms of the size of assets under their control. 
However the importance of such assets varies a great deal between the 
Member States, and between the different systems of pension provision. 
Where pension liabilities are covered by book reserves in the balance sheet 
of an employer, there is no financial institution in the above sense, and 
such systems do not therefore come within the scope of this proposal. 
Indeed the requirements of this proposal would have little meaning in such 
a case. Much the same is true of pay-as-you-go systems where pensions are 
paid directly from contribution income. However to the extent that 
reserves are built up in such systems and are invested in financial assets, 
they clearly can be considered as financial institutions for whom the 
requirements of this proposal would have a meaning and indeed they would 
fall within the scope of this proposal for a directive. 
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However the vast bulk of the assets covered by this proposal are held by 
those institutions for retirement provision established under funded 
systems, where assets are accumulated to cover not only current pensions 
but also liabilities for future pension payments. For such institutions it 
is clear that the protection of the pension rights of members requires that 
the assets should be invested prudently. 
The provisions of the Capital Movements Directive (88/361/EEC) have a clear 
impact on institutions for retirement provision but are without prejudice 
to the right of Member States to take all requisite measures to prevent 
infringements of their laws and regulations, inter alia in the field of 
prudential supervision (Article 4). 
In order that institutions for retirement provision may benefit fully from 
the free movement of services and capital, it is therefore necessary to 
define carefully the level and the type of prudential investment rules, 
which may not pursue any other purpose. Such rules must be Justified by 
the general good and thus enable the competent authorities of the Member 
States to exercise a control on institutions for retirement provision which 
is proportional to the prudential objectives they may legitimately pursue. 
Consequently, on the one hand this proposal for a directive lays down 
limits on the type of restrictions that may be imposed by Member States on 
prudential grounds, where such restrictions would be inconsistent with 
treaty principles. On the other hand it proposes a number of prudential 
investment principles which should be followed by all institutions for 
retirement provision. Although this does not prevent Member States from 
applying other, possibly more detailed, investment rules consistent with 
these principles, it provides a standard against which any such rules may 
be assessed. 
In determining its proposals concerning the prudential investment of 
assets, the Commission has taken account of the proposals already made for 
insurance companies, particularly in the area of life assurance, and 
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and in certain cases an identical text is proposed. This is particularly 
the case for the limits on the type of restrictions that may be imposed, 
such as those concerning localisation or investment in particular 
categories of asset. However the proposal also allows for differences 
between institutions for retirement provision and insurance companies both 
in the nature of their liabilities and in the extent of harmonisation that 
I s required. In particular, as the current proposal does not cover the 
objective of cross-border membership, it does not require mutual 
recognition of the supervisory systems in different Member States, it is 
therefore appropriate that the harmonisation proposed for prudential 
investment rules is not as extensive as is the case in life assurance. 
The proposal aims to facilitate the exercise of freedoms for institutions 
for retirement provision in respect of the investment of their assets and 
their choice of investment manager. There will of course be no obligation 
to use these greater freedoms. The proposal in no way changes the 
procedures for taking decisions on investments or investment management 
within institutions for retirement provision, in particular it does not in 
any way alter the extent or the nature of any arrangements for 
participation in decision-making by representatives of the members. 
In summary, the essential value of the proposal lies in providing greater 
precision as to the application of fundamental treaty principles to 
institutions for retirement provision. By providing a framework for the 
application of prudential investment rules the proposal will make it 
significantly easier to assess whether individual rules in Member States 
are consistent with the treaty freedoms. Similarly for the application of 
freedom of services provided to institutions for retirement provision, the 
proposal provides greater legal precision but does not introduce any 
fundamentally new principles. 
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II. COMMENTARY QN THE ARTICLES 
Article 1 - Définitions 
This Article contains definitions of certain terms used In the proposal for 
a directive, the aim being to clarify their meaning and hence contribute to 
a better understanding of the Directive. 
The definitions of 'Institution for retirement provision' and 'Retirement 
Benefits' are drawn widely, the intention being to bring within the scope 
of the directive a wide variety of different types of institution, which 
however have in common that they hold assets for the purpose of providing 
retirement or other social benefits In the context of an occupational or 
employment link. Statutory social security funds as defined in regulation 
1408/71 are specifically excluded from the scope. 
Article Z - Scope 
This article builds on the definitions in Article 1 to define the scope of 
the proposal for a directive. This scope is wider than would be 
appropriate for a directive covering the objective of cross-border 
membership and in particular includes institutions which operate 
essentially on a pay-as-you-go basis with compulsory membership and 
limited reserves. The proposal does not in any way call into question the 
compulsory membership of these institutions, nor is there any Intention to 
do so in any future proposals. 
Paragraph 2 makes clear that the proposal is not intended to apply to 
financial institutions which are already covered by other directives in 
related areas. This is necessary in view of the close relationships and 
the overlaps In type of activity between different types of financial 
institutions. 
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Article 3 - Investment management and Custody services 
The effective exercise of the right of free provision of services, in this 
case the service of investment management, requires not only that the 
providers of a service are free to offer their services throughout the 
Community, but also that the demanders of a service are free to select a 
provider who is not established in their own Member State. 
Whilst other Community legislation, or proposed legislation, deals with the 
authorisation and the activity of the providers of the service of 
investment management, paragraph 1 of this article aims to ensure the 
freedom of institutions for retirement provision as demanders of this 
service to choose freely from amongst those authorised to provide it. 
Paragraph 3 does the same for the service of acting as a custodian or 
depositary for the assets of such institutions. Whilst the provisions of 
these paragraphs should help to clarify the position in these respects, 
such freedoms are in principle already available by direct application of 
the Treaty. 
Paragraph 2 deals with the situation where an institution for retirement 
provision manages its own investments, or those of an associated 
institution within a group of undertakings. 
Although not all Member States allow this possibility, it is necessary that 
where it is allowed, such freedom should not discriminate, particularly in 
cases where it has been necessary for an undertaking, or a group of 
undertakings to set up separate institutions to cover employees in 
different Member States. It should be possible for such institutions to 
operate for the purposes of the choice of investment manager in the same 
way as they would have been able to, if there had beer, a single 
institution, and in particular to manage their own investments. 
The use of one institution for retirement provision as investment manager 
for a separate institution associated with the same group of undertakings 
does not however imply any pooling of the assets of such institutions, nor 
any difference In the treatment of such institutions for taxation purposes. 
Separate identification of the assets of each institution is in practice 
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likely to be necessary for several purposes, including for instance the 
need to respect the rights of members to participate in the management of 
the institutions. 
Article 4 - Investment of assets 
This article lays down a number of principles for the prudent investment of 
assets of institutions for retirement provision. It also restricts the 
possibilities for Member States to apply rules which would limit this 
freedom. This applies in particular to minimum investment requirements in 
certain asset categories, to rules on localisation of assets and on 
currency matching, which could otherwise have the effect of limiting the 
possibilities for cross-border investment. In this respect the proposed 
rules are consistent with those that have been proposed for insurance 
compan i es. 
However this proposal draws a distinction between those institutions whose 
liabilities are fixed in monetary terms and those whose liabilities are 
instead determined by some other factor such as future salary levels. In 
the latter case the principles of currency matching do not apply in the 
same way and currency diversification may be a more important element of 
prudent investment management. It Is therefore appropriate for matching 
requirements to be less restrictive. 
Paragraph 5 of this article makes clear that Member States are free to lay 
down more detailed rules for the investment of the assets of institutions 
established within their territory. These more detailed rules must however 
not contravene the principles laid down in this article. 
There is at this stage no need for more detailed rules to be harmonised at 
Community level as, in the absence of any proposals for cross-border 
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membership, this proposal does not require mutual recognition of the 
supervisory systems in different Member States. 
Articles 5-7 - Implementation of the Directive 
These articles contain the final provisions. 

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Proposal for a 
COUNCIL DIRECTIVE 
relating to the freedom of management and investment of funds 
held by institutions for retirement provision 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Economic Community, 
and in particular Articles 57(2) and 66 thereof, 
Having regard to the proposal from the Commission, 
In cooperation with the European Parliament, 
Having regard to the opinion of the Economic and Social Committee, 
Whereas institutions for retirement provision are institutions sui generis 
which are amongst the largest and most important financial institutions 
within the Community and often represent an alternative means of providing 
the same benefits as are provided by other competing financial 
inst itut ions; 
Whereas the provision of supplementary retirement benefits through 
institutions for retirement provision is a matter of considerable 
importance for social policy within the Community and forms one part of the 
overall structure of retirement provision, the components of which vary 
considerably between Member States, particularly as regards the level and 
the form of statutory social security retirement benefits; whereas there 
is no intention to alter at Community level the balance which has been 
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arrived at in individual Member States in this respect; whereas the 
provision of supplementary retirement benefits can facilitate the effective 
provision of a satisfactory level of overall retirement income; whereas 
the protection of rights to retirement benefits is therefore a matter of 
proper concern and great importance for the Member States; 
Whereas the provisions of this Directive apply equally to many different 
types of institution for retirement provision including institutions which 
operate on a fully funded basis, but also some institutions operating 
essentially on a pay-as-you-go basis with compulsory membership and limited 
reserves on the basis of generational transfers; whereas such institutions 
are different in many other respects; whereas the characteristics which are 
necessary for their stability must be taken into account; 
Whereas freedom of services extends to the provision of investment 
management services and custody services to institutions for retirement 
provision; whereas a situation where such institutions are restricted to 
the use of investment managers or custodians established in a particular 
Member State is incompatible with the principle of freedom of services; 
whereas the requirements for authorisation and mutual recognition of the 
providers of such services are set out under the legislation applicable to 
these providers; 
Whereas institutions for retirement provision represent major accumulations 
of capital within the Community; whereas the provisions of Council 
Directive 88/361/EEC1 (capital movements) have a clear impact on such 
institutions but are without prejudice to the right of Member States to 
take all requisite measures to prevent infringements of their laws and 
regulations, inter alia, in the field of prudential supervision of 
financial institutions; whereas it is therefore necessary to define in 
1 OJ No L 178, 8.7.1988, p. 5. 
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more detail the prudential investment rules which are consistent with the 
free movement of capital and the freedom of services; whereas the adoption 
of common prudential investment principles will facilitate the exercise of 
the freedom of establishment for institutions for retirement provision; 
Whereas the protection of members' rights requires that the assets of 
institutions for retirement provision be invested in a prudent manner; 
whereas capital movements within the Community must not lead to a situation 
where an increased level of risk could endanger those rights; whereas the 
assets of institutions for retirement provision must therefore be invested 
with the care, skill, prudence and diligence, under the circumstances then 
prevailing, that a prudent man acting in a like capacity and familiar with 
such matters, would use in the conduct of an enterprise of a like character 
and with like aims-, whereas those responsible for the investment of the 
assets of an institution for retirement provision, such as the directors 
or trustees of such an institution, and their delegates, such as external 
or internal managers and advisers, must act together in the sole interest 
of plan participants and beneficiaries; whereas no investment should be 
made for the particular interest of any such directors or trustees or of 
their delegates, nor should any investment be made to pursue solely the 
interests of the undertaking or undertakings which sponsor the institution; 
whereas the investment of the assets of an institution for retirement 
provision should follow the principles of sufficient diversification, 
quality, liquidity and restraint on investment in the sponsoring 
undertaking or undertakings; whereas the investment of such assets must be 
considered and Judged within the context of the overall portfolio and the 
performance objectives and risk tolerance of the institution and not within 
the context of each investment taken in isolation; 
Whereas supplementary retirement provision is often organised on an 
occupational basis either for a particular sector or associated with 
particular undertakings; whereas as a result of progress towards the 
s ingle market such undertakings are often organised on a basis which 
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crosses national borders and wish to organise retirement provision on a 
consistent basis; whereas direct and indirect barriers still exist to the 
free provision of cross-border services by institutions for retirement 
provision; whereas in this respect there are also requests from consumer 
representatives to take the Community dimension Into account in the 
development of supplementary retirement benefits; whereas this dimension 
could, subject to certain conditions, contribute to the transnational 
mobility of workers; whereas further work needs to be done on this subject, 
taking into account the differences between the types of institution for 
retirement provision and not calling into question the functioning of 
institutions with compulsory membership, 
HAS ADOPTED THIS DIRECTIVE: 
Article 1 
1. This Directive shall apply to institutions for retirement provision in 
order to ensure certain freedoms concerning the management and 
investment of their assets. 
2. This Directive shall not apply to financial institutions which are 
covered by 
CounciI Direct ive 
Directive 
Direct ive 
Council Directive 
Directive 89/646/EEC1 
85/611/EEC2 (3rd Life Assurance Directive) 
(3rd Non-Life Insurance Directive) 
(Investment Services Directive) 
1 OJ No L 386, 30.12.1989, p. 1. 
2 OJ No L 375, 31.12.1985, p. 3. 
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Article 2 
For the purpose of this Directive 
(a) "institution for retirement provision" means an institution which is 
established separately from any sponsoring undertaking for the purpose 
of financing retirement benefits to a group of persons defined by an 
occupational or professional or similar relationship. Institutions, 
other than competent institutions within the meaning of Council 
Regulation No 1408/711, which provide retirement benefits prescribed 
by or provided for in social security legislation are regarded as 
institutions for retirement provision within this definition. 
(b) "retirement benefits" means benefits in the form of pensions, whether 
for life-time or a temporary period, or in the form of lump sums paid 
on death, disability, cessation of employment or when a defined 
retirement age is reached, or support payments in case of sickness or 
indigence when they are supplementary to the abovementioned benefits. 
Benefits which replace social security benefits as defined above are 
regarded as retirement benefits within this definition. 
(c) "sponsoring undertaking" means any undertaking or other body which pays 
contributions into an institution for retirement provision. 
Article 3 
1. Member States which permit the external management of the investments 
of certain forms of institution for retirement provision, shall not 
restrict the freedom of such institutions to choose an investment 
manager, for parts or the whole of their assets, who is established in 
another Member State and duly authorised for this activity, according 
to Directive (3rd Life Assurance Directive), Directive 
(Investments Services Directive) or Directive 89/646/EEC. 
1 CJ No L 149, 5.7.1971, p. 2. 
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2. Member States shall allow institutions for retirement provision of 
which the sponsoring undertakings belong to a group of undertakings to 
organise the management of their investments on a group basis, through 
one of these institutions. This shall not affect the right of Member 
States to provide that institutions for retirement provision shall be 
managed by a separate legal entity. 
3. Member States which permit or require that the assets of an institution 
for retirement provision are held by a custodian shall not restrict the 
freedom of such institutions to choose a custodian to hold parts or the 
whole of their assets, who is established in another Member State and 
duly authorised according to Directive 89/646/EEC or Directive 
(Investment Services Directive), or is accepted as a depositary for the 
purposes of Directive 85/611/EEC. 
Article 4 
1. Member States shall require institutions for retirement provision 
established within their territory to invest all assets held to cover 
expected future retirement benefit payments in accordance with the 
fol lowing pr inciples: 
(a) the assets shall be invested in a manner appropriate to the nature 
and the duration of the corresponding liabilities and the level of 
their funding, taking account of the requirements of security, 
quality, liquidity and profitability of the institution's portfolio 
as a whole; 
(b) the assets shall be sufficiently diversified in such a way as to 
avoid major accumulations of risk in the portfolio as a whole; 
(c) investment in the sponsoring undertaking or undertakings shall be 
restricted to a prudent level. 
In the application of these principles, the extent of any insolvency 
insurance or State guarantees must be taken into account. 
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2. Member States shall not require institutions for retirement provision 
to invest in particular categories of assets or to localise their 
assets in a particular Member State. 
3. Member States shall In no case require institutions for retirement 
provision to hold more than 80% of their assets in matching currencies, 
after taking account of the effect of any currency hedging instruments 
held by the institution. In the case of those institutions for 
retirement provision whose liabilities are not fixed in monetary 
terms, but are for instance linked to future salary levels, this 
percentage shall be reduced to 60%. 
Assets denominated in ECU shall be regarded as matching any particular 
currency in the Community. 
4. Member States shall not subject the investment decisions of an 
institution for retirement provision or its investment manager to any 
kind of prior approval or systematic notification requirements. 
5. Member States may lay down more detailed rules consistent with 
paragraphs 1 to 4. 
Article 5 
1. Member States shall bring into force the laws, regulations and 
administrative provisions necessary to comply with this Directive not 
later than 31 December 1992. They shall forthwith inform the 
Commission thereof. 
When Member States adopt these provisions, these shall contain a 
reference to this Directive or shall be accompanied by such reference 
at the time of their official publication. The procedure for such 
reference shall be adopted by Member States. 
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2. Member States shall communicate to the Commission the texts of the main 
laws, regulations or administrative provisions which they adopt in the 
field covered by this Directive. 
Article 6 
This Directive is addressed to the Member States. 
Done at Brussels, For the Council 
The President 
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IMPACT ASSESSMENT FORM 
THE IMPACT OF THE PROPOSAL ON BUSINESS 
with special reference to small and medium-sized enterprises (SMEs) 
Title of proposal: Proposal for a Council Directive on the coordination 
of laws, regulations and administrative provisions 
relating to the freedom of management and investment 
of funds held by institutions for retirement 
provision. 
Reference Number (Répertoire): C0M(91) 
The proposal 
1. Taking account of the principle of subsidiarity, why is Community 
legislation necessary In this area and what are its main aims? 
The main aims of the directive are as follows: 
1. To define the level and the type of prudential investment rules 
which are consistent with the freedom of services and the free 
movement of capital as applied to institutions for retirement 
provision. 
2. To remove obstacles to the free provision of services by investment 
managers and asset custodians by removing restrictions on 
institutions for retirement provision freely choosing from amongst 
the providers of such services. 
Since the main aims of the directive involve the removal of barriers to 
cross-border provision of services and investment of assets, 
legislation is necessary at Community level. It is recognised 
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however that the principle of subsidiarity applied to the area of 
retirement provision requires that Member States should retain a large 
measure of freedom in their choice of systems for the financing of 
retirement benefits and indeed the level of such benefits. This freedom is 
entirely respected in this proposal for a directive. 
The Impact on business 
2. Who wiIl be affected by the proposal? 
- which sectors of business 
There will be an indirect effect on businesses in all sectors in as far 
as businesses contribute to institutions for retirement provision set 
up for the benefit of their employees. The institutions themselves are 
not businesses, in the normal sense of the word, although they may in 
some aspects of their activity, act in a similar manner. 
- which sizes of business (what is the concentration of small and medium-
sized firms) 
All sizes of businesses are potentially affected in the indirect manner 
described above. However there is probably a proportionately greater 
number of large firms affected, as where businesses have a choice as to 
the level of retirement benefits provided and the method of their 
financing, larger firms are more likely to choose the option of 
establishing a an institution for retirement provision. Smaller firms 
on the other hand are more likely to choose provision through life 
assurance contracts. 
- are there particular geographical areas of the Community where these 
businesses are found 
InstiiUtions for retirement provision as defined in the proposal for a 
directive are particularly concentrated in the United Kingdom 
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and the Netherlands and to a lesser extent in Ireland, at least in as far 
as the level of assets is concerned. The level of assets covered in other 
Member States is much lower, although the absolute amounts can still be 
quite significant. 
3. What will businesses have to do to comply with the proposal? 
Businesses will not need to take any direct action to comply with the 
proposal. Action will be necessary only by national legislators and 
supervisory authorities. However this will increase the freedom 
available to institutions for retirement provision and they may then 
wish to take advantage of this increased freedom. In as far as the 
institutions themselves can be considered as businesses, or in as far 
as businesses are involved in the administration of such institutions, 
they may therefore be indirectly affected. 
4. What economic effects is the proposal likely to have? 
- on investment and the creation of new businesses 
By removing restrictions on the investment of the assets of 
institutions for retirement provision, the proposal should improve the 
economic efficiency of investment and channel resources towards more 
productive investment, which could include the creation of new 
bus i nesses. 
- on the competitive position of businesses 
In many cases retirement plans provide defined benefits, with 
businesses accepting the commitment to finance the balance of the cost 
after allowing for fixed contributions by members. Any improvement in 
the economic efficiency of the investment of the related assets could 
therefore directly reduce the cost to businesses of financing this 
commitment and thus improve their competitive position. 
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5. Does the proposal contain measures to take account of the specific 
situation of small and medium-sized firms (reduced or different 
requirements, etc.)? 
No such measures are considered necessary in view of the nature of the 
proposal, which is such as to reduce restrictions on institutions for 
retirement provision, and hence indirectly on businesses, of all sizes. 
Consultation 
6. List the organizations which have been consulted about the proposal and 
outline their main views. 
European Federation for Retirement Provision (EFRP) 
The EFRP supports the proposal, particularly as concerns the proposals 
for freedom of cross-border investment. They have also indicated their 
support for common prudential principles for the investment of assets. 

ISSN 0254-1475 
COM(91) 301 final 
DOCUMENTS 
EN 05 
Catalogue number : CB-CO-91-491-EN-C 
ISBN 92-77-77256-5 
Office for Official Publications of the European Communities 
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