Common Position (EC) No 62/2002 of 5 November 2002 adopted by the Council, acting in accordance with the procedure referred to in Article 251 of the Treaty establishing the European Community, with a view to adopting a directive of the European Parliament and of the Council on the activities and supervision of institutions for occupational retirement provision
Date: 2002-11-05
Institutions: Council of the European Union
Subjects: cooperation policy, exchange of information, financial institution, pension scheme, social-security benefit, supplementary pension

C 299 E/16

EN

Official Journal of the European Communities

3.12.2002

COMMON POSITION (EC) No 62/2002

adopted by the Council on 5 November 2002

with a view to adopting Directive 2002/. . ./EC of the European Parliament and of the Council of
. . . concerning the activities and supervision of institutions for occupational retirement provision

(2002/C 299 E/02)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Articles 47(2), 55 and 95(1)
thereof,

Having regard to the proposal from the Commission (1),

Having regard to the Opinion of the Economic and Social
Committee (2),

Acting in accordance with the procedure laid down in Article
251 of the Treaty (3),

Whereas:

(1) A genuine internal market for financial services is crucial
for economic growth and job creation in the Community.

(2) Major achievements have already been made in the estab-
lishment of this internal market, allowing financial insti-
tutions to operate in other Member States and ensuring a
high level of protection for the consumers of financial
services.

(3) The communication from the Commission ‘Implementing
the framework for financial markets: action plan’ identifies
a series of actions that are needed in order to complete the
internal market for financial services, and the European
Council, at its meeting in Lisbon on 23 and 24 March
2000, called for the implementation of this Action Plan
by 2005.

institutions for occupational

(4) The Action Plan for Financial Services stresses as an urgent
priority the need to draw up a Directive on the prudential
retirement
supervision of
provision, as these institutions are major financial
insti-
tutions which have a key role to play in ensuring the
financial
integration,
efficiency and liquidity of
markets, but
coherent
framework allowing them to
Community legislative
benefit fully from the advantages of the internal market.

the
to a

are not

subject

they

(1) OJ C 96 E, 27.3.2001, p. 136.
(2) OJ C 155, 29.5.2001, p. 26.
(3) Opinion of the European Parliament of 4 July 2001 (OJ C 65 E,
14.3.2002, p. 135)
Journal),
Council Common Position of 5 November 2002 and Decision of
the European Parliament of . . . (not yet published in the Official
Journal).

(not yet published in the Official

(5) This Directive thus represents a first step on the way to an
internal market
retirement provision
for occupational
organised on a European scale. By setting ‘the prudent
person rule’ as
for capital
investment and making it possible for institutions to
the redirection of savings into
operate across borders,
the
retirement provision is
encouraged,
thus contributing to economic and social
progress.

the underlying principle

sector of occupational

(6) The prudential

rules laid down in this Directive are
intended both to guarantee a high degree of security for
through the imposition of stringent
future pensioners,
supervisory standards, and to clear
the
efficient management of occupational pension schemes.

the way for

(7) Institutions which are completely separated from any
sponsoring undertaking and which operate on a funded
basis for the sole purpose of providing retirement benefits
should have freedom to provide services and freedom of
prudential
investment
requirements, regardless of whether these institutions are
considered as legal entities.

coordinated

subject

only

to

(8) In accordance with the principle of subsidiarity, Member
States should retain full responsibility for the organisation
of their pension systems as well as for the decision on the
role of each of the three ‘pillars’ of the retirement system
in individual Member States. In the context of the second
pillar, they should also retain full responsibility for the role
and functions of the various institutions providing occu-
pational retirement benefits, such as industry-wide pension
life-assurance
funds,
this
companies. This Directive is not
prerogative into question.

intended to call

company

pension

funds

and

(9) National

in

for

rules

persons

institutions

concerning the participation of

self-
employed
occupational
retirement provision differ. In some Member States, insti-
tutions for occupational retirement provision can operate
on the basis of agreements with trade or trade groups
in a self-employed capacity or
whose members act
directly with self-employed and employed persons.
In
some Member States a self-employed person can also
become a member of an institution when the self-
employed person acts as employer or provides his
professional services to an undertaking. In some Member
States self-employed persons cannot join an institution for
retirement
occupational
certain
requirements,
including those imposed by social and
labour law, are met.

provision

unless

3.12.2002

EN

Official Journal of the European Communities

C 299 E/17

(10) Institutions managing social security schemes, which are
should be
already coordinated at Community level,
excluded from the scope of
this Directive. Account
should nevertheless be taken of the specificity of insti-
in a single Member State, manage both
tutions which,
social security schemes and occupational pension schemes.

(11) Financial

institutions which already benefit
from a
Community legislative framework should in general be
excluded from the scope of this Directive. However, as
these institutions may also in some cases offer occupa-
tional pension services,
to ensure that
this Directive does not lead to distortions of competition.
Such distortions may be
avoided by applying the
prudential requirements of this Directive to the occupa-
tional pension business of life-assurance companies.

is important

it

(12) Giving Member States the possibility to exclude from the
scope of national
implementing legislation institutions
managing schemes which together have less than 100
in total can facilitate supervision in some
members
Member States without undermining the proper func-
tioning of the internal market in this field. However, this
should not undermine the right of such institutions to
appoint
investment
investment
portfolio and the custody of
managers and custodians established in another Member
State and duly authorised.

their
their assets

the management of

for

(13) Institutions such as ‘Unterstützungskassen’

in Germany,
where the members have no legal rights to benefits of a
certain amount and where their interests are protected by
a compulsory statutory insolvency insurance, should be
excluded from the scope of the Directive.

(14) In order to protect members and beneficiaries, institutions
for occupational retirement provision should limit their
activities to the activities, and those arising therefrom,
referred to in this Directive.

(15) In the event of the bankruptcy of a sponsoring under-
taking, a member faces the risk of losing both his/her
job and his/her acquired pension rights. This makes it
separation
necessary to ensure that
between that undertaking and the institution and that
minimum prudential standards are laid down to protect
members.

there is a clear

In some Member States,

(16) Institutions for occupational retirement provision operate
and are supervised with significant differences in Member
States.
supervision can be
exercised not only over the institution itself but also
over the entities or companies which are authorised to
manage these institutions. Member States should be able
to take such specificity into account as long as all the
requirements laid down in this Directive are effectively
to allow
met. Member States

should also be able

insurance entities and other financial entities to manage
institutions for occupational retirement provision.

for occupational

(17) Institutions
financial
certain minimum prudential standards with respect
their activities and conditions of operation.

retirement provision are
service providers and therefore should meet
to

(18) The huge number of institutions in certain Member States
means a pragmatic solution is necessary as regards prior
authorisation of
if an institution
institutions. However,
wishes to manage a scheme in another Member State, a
prior authorisation granted by the competent authority of
the home Member State should be required.

(19) Each Member State should require that every institution
located in its territory draw up annual accounts and
annual reports taking into account each pension scheme
operated by the institution and, where applicable, annual
accounts and annual reports for each pension scheme. The
annual accounts and annual reports, reflecting a true and
fair view of the institution's assets, liabilities and financial
position,
each pension scheme
operated by an institution, and duly approved by an auth-
orised person, are an essential source of information for
members and beneficiaries of a scheme and the competent
authorities. In particular, they enable the competent auth-
orities to monitor the financial soundness of an institution
and assess whether the institution is able to meet all its
contractual obligations.

taking into account

(20) Proper information for members and beneficiaries of a
pension scheme is crucial. This is of particular relevance
information concerning the financial
for
requests
the contractual rules,
soundness of
the
benefits and the actual
financing of accrued pension
entitlements, the investment policy and the management
of risks and costs.

for
the institution,

(21) The investment policy of an institution is a decisive factor
and affordability of occupational
for both security
pensions. The institutions should therefore draw up and,
at least every three years, review a statement of investment
principles. It should be made available to the competent
authorities and on request also to members and bene-
ficiaries of each pension scheme.

(22) To fulfil their statutory function, the competent authorities
should be provided with adequate rights to information
and powers of intervention with respect to institutions
and the persons who effectively run them. Where an insti-
tution for occupational retirement provision has trans-
ferred functions of material importance such as investment
information technology or accounting to
management,
other companies (outsourcing),
it should be possible for
the rights to information and powers of intervention to be
enlarged so as to cover these outsourced functions in order
to check whether
in
accordance with the supervisory rules.

those activities are carried out

C 299 E/18

EN

Official Journal of the European Communities

3.12.2002

(23) A prudent calculation of

technical provisions

is an
essential condition to ensure that obligations to pay
retirement benefits can be met. Technical provisions
should be calculated on the basis of recognised actuarial
methods and certified by qualified persons. The maximum
interest rates should be chosen prudently according to any
relevant national rules. The minimum amount of technical
provisions should both be sufficient for benefits already in
payment to beneficiaries to continue to be paid and reflect
the commitments that arise out of members' accrued
pension rights.

efficient

able to opt for an asset allocation that suits the precise
nature and duration of their liabilities. These aspects call
for
supervision and an approach towards
investment rules allowing institutions sufficient flexibility
investment
to decide on the most secure and efficient
policy and obliging them to act prudently. Compliance
with the ‘prudent person rule’
therefore requires an
investment policy geared to the membership structure of
the individual
retirement
provision.

institution for occupational

(24) Risks covered by institutions vary significantly from one
Member State to another. Home Member States should
therefore have the possibility to make the calculation of
technical provisions
to additional and more
subject
detailed rules than those laid down in this Directive.

(29) Supervisory methods and practices vary among Member
States. Therefore, Member States should be given some
discretion on the precise investment rules that they wish
to impose on the institutions located in their territories.
However, these rules must not restrict the free movement
of capital, unless justified on prudential grounds.

(25) Sufficient and appropriate assets to cover the technical
the interests of members and bene-
provisions protect
ficiaries of the pension scheme if the sponsoring under-
taking becomes insolvent. In particular in cases of cross-
the mutual recognition of supervisory
border activity,
the
principles applied in Member States requires that
technical provisions be fully funded at all times.

(26) If the institution does not work on a cross-border basis,
Member States should be able to permit underfunding
provided that a proper plan is established to restore full
funding and without prejudice to the requirements of
Council Directive 80/987/EEC of 20 October 1980 on
the Member States
the approximation of
relating to the protection of employees in the event of
the insolvency of their employer (1).

the laws of

or

guarantees

certain benefits

(27) In many cases, it could be the sponsoring undertaking and
not the institution itself that either covers any biometric
risk or
investment
performance. However, in some cases, it is the institution
itself which provides such cover or guarantees and the
sponsor's obligations are generally exhausted by paying
In these circumstances, the
the necessary contributions.
life-assurance
products offered are similar to those of
companies and the institutions concerned should hold at
least
the same additional own funds as life-assurance
companies.

(28) Institutions are very long-term investors. Redemption of
the assets held by these institutions cannot,
in general,
be made for any purpose other than providing retirement
benefits. Furthermore, in order to protect adequately the
rights of members and beneficiaries, institutions should be

(1) OJ L 283, 28.10.1980, p. 23. Directive as last amended by the

1994 Act of Accession.

(30) As very long-term investors with low liquidity risks, insti-
tutions for occupational retirement provision are in a
position to invest in non-liquid assets such as shares as
well as in risk capital markets within prudent limits. They
can also benefit from the advantages of international diver-
sification. Investments in shares, risk capital markets and
should
currencies other
therefore not be restricted except on prudential grounds.

than those of

the liabilities

(31) However, if the institution works on a cross-border basis,
it may be asked by the competent authorities of the host
Member State to apply limits for investment in shares and
similar assets not admitted to trading on a regulated
in shares and other instruments issued by the
market,
same
in
in
undertaking
non-matching currencies provided such rules also apply
to institutions located in the host Member State.

denominated

assets

or

(32) Restrictions regarding the free choice by institutions of
approved asset managers and custodians limit competition
in the internal market and should therefore be eliminated.

(33) Without prejudice to national social and labour legislation
including
on the organisation of pension systems,
compulsory membership and the outcomes of collective
bargaining agreements, institutions should have the possi-
bility to provide their services in other Member States.
They should be allowed to accept sponsorship from under-
takings located in other Member States and to operate
pension schemes with members
in more than one
Member State. This would potentially lead to significant
economies of scale for these institutions,
improve the
competitiveness of the Community industry and facilitate
requires mutual
recognition of
labour mobility. This
these
Proper
standards.
prudential
of
prudential
the
should be
standards
competent authorities of the home Member State, unless
specified otherwise.

enforcement

supervised

by

3.12.2002

EN

Official Journal of the European Communities

C 299 E/19

to manage

(34) The exercise of the right of an institution in one Member
State
an occupational pension scheme
contracted in another Member State should fully respect
the provisions of the social and labour law in force in the
host Member State insofar as it is relevant to occupational
pensions,
for example the definition and payment of
retirement benefits and the conditions for transferability
of pension rights.

(35) When a scheme is ring-fenced the provisions of

this

Directive apply individually to that scheme.

2.

This Directive shall not apply to:

(a)

institutions managing social security schemes which are
covered by Regulation (EEC) No 1408/71 (1) and Regu-
lation (EEC) No 574/72 (2);

(b) institutions which are covered by Directive 79/267/EEC (3),
85/611/EEC (5),

Directive
Directive 93/22/EEC (6) and Directive 2000/12/EC (7);

73/239/EEC (4),

Directive

(36) It is necessary to make provision for cooperation between
the Member States and

the competent authorities of
between those authorities and the Commission.

(c)

institutions which operate on a pay-as-you-go basis;

(37) The Commission should be assisted by an insurance and
pension committee, which in its work will take account of
the distinct specificities of
institutions for occupational
retirement provision and insurance undertakings and
take
its work
accordingly.

the necessary measures

to organise

cannot

provision,

retirement

occupational

(38) Since the objective of the proposed action, namely to
create a Community legal framework covering institutions
for
be
sufficiently achieved by the Member States and can
the
therefore, by reason of
action, be better
the
Community may adopt measures, in accordance with the
principle of subsidiarity as set out in Article 5 of the
Treaty. In accordance with the principle of proportionality
this Directive does not go
as set out
beyond what
to achieve that
objective,

the scale and effects of
achieved by the Community,

is necessary in order

in that Article,

(d) institutions where employees of

the sponsoring under-
takings have no legal rights to benefits and where the
sponsoring undertaking can redeem the assets at any
time and not necessarily meet its obligations for payment
of retirement benefits;

(e) companies using book-reserve schemes with a view to

paying out retirement benefits to their employees.

(1) Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on
the application of social security schemes to employed persons, to
self-employed persons and to members of their families moving
within the Community (OJ L 149, 5.7.1971, p. 2). Regulation as
last amended by Regulation (EC) No 1386/2001 of the European
Parliament and of the Council (OJ L 187, 10.7.2001, p. 1).

for

the

procedure

(2) Regulation (EEC) No 574/72 of the Council of 21 March 1972
fixing
(EEC)
No 1408/71 on the application of social security schemes to
employed persons, to self-employed persons and to members of
their families moving within the Community (OJ L 74, 27.3.1972,
p. 1). Regulation as last amended by Commission Regulation (EC)
No 410/2002 (OJ L 62, 5.3.2002, p. 17).

implementing Regulation

HAVE ADOPTED THE FOLLOWING DIRECTIVE:

Article 1

Subject

This Directive lays down rules for the taking up and pursuit of
activities carried out by institutions for occupational retirement
provision.

Article 2

Scope

1.
This Directive shall apply to institutions for occupational
retirement provision. Where in accordance with national law
institutions for occupational retirement provision do not have
legal personality, Member States shall apply this Directive
either to those institutions or, subject
to
those authorised entities responsible for managing them and
acting on their behalf.

to paragraph 2,

(3) First Council Directive 79/267/EEC of 5 March 1979 on the coor-
dination of laws, regulations and administrative provisions relating
to the taking up and pursuit of the business of direct life assurance
(OJ L 63, 13.3.1979, p. 1). Directive as last amended by Directive
2002/12/EC of the European Parliament and of the Council (OJ L
77, 23.3.2002, p. 11).

(4) First Council Directive 73/239/EEC of 24 July 1973 on the coor-
dination of laws, regulations and administrative provisions relating
to the taking up and pursuit of the business of direct insurance
other than life assurance (OJ L 228, 16.8.1973, p. 3). Directive as
last amended by Directive 2002/13/EC of the European Parliament
and of the Council (OJ L 77, 23.3.2002, p. 17).

(5) Council Directive 85/611/EEC of 20 December 1985 on the coor-
dination of laws, regulations and administrative provisions relating
to undertakings for collective investment in transferable securities
(UCITS) (OJ L 375, 31.12.1985, p. 3). Directive as last amended by
Directive 2001/108/EC of
the
Council (OJ L 41, 13.2.2002, p. 35).

the European Parliament and of

(6) Council Directive 93/22/EEC of 10 May 1993 on investment
services in the securities field (OJ L 141, 11.6.1993, p. 27).
Directive as
the
European Parliament and of the Council (OJ L 290, 17.11.2000,
p. 27).

last amended by Directive 2000/64/EC of

(7) Directive 2000/12/EC of

the European Parliament and of

the
Council of 20 March 2000 relating to the taking up and pursuit
of the business of credit institutions (OJ L 126, 26.5.2000, p. 1).
Directive as amended by Directive 2000/28/EC (OJ L 275,
27.10.2000, p. 37).

C 299 E/20

EN

Official Journal of the European Communities

3.12.2002

Article 3

Application to institutions operating social

security

schemes

Institutions for occupational retirement provision which also
operate
compulsory employment-related pension schemes
which are considered to be social security schemes covered
by Regulations (EEC) No 1408/71 and (EEC) No 574/72 shall
be covered by this Directive in respect of their non-compulsory
occupational retirement provision business. In that case, the
liabilities and the corresponding assets shall be ring-fenced
and it shall not be possible to transfer them to the compulsory
pension schemes which are considered as
security
schemes or viceversa.

social

Article 4

Optional application to institutions covered by Directive
79/267/EEC

Home Member States may choose to apply the provisions of
Articles 9 to 16 and Articles 18 to 20 of this Directive to the
occupational retirement provision business of insurance under-
takings which are covered by Directive 79/267/EEC. In that
case, all assets and liabilities corresponding to the said
business shall be ring-fenced, managed and organised sepa-
rately from the other activities of the insurance undertakings,
without any possibility of transfer.

In such case, and only as far as their occupational retirement
provision business is concerned, insurance undertakings shall
not be subject to Articles 17 and 21 of Directive 79/267/EEC
and to Articles 19 to 24 and 31 of Directive 92/96/EEC (1).

The home Member State shall ensure that either the competent
authorities, or the authorities responsible for supervision of
insurance undertakings covered by Directive 79/267/EEC, as
part of their supervisory work, verify the strict separation of
the relevant occupational retirement provision business.

Article 5

Small pension institutions and statutory schemes

With the exception of Article 19, Member States may choose
not to apply this Directive, in whole or in part, to any insti-
tution located in their
territories which operates pension
schemes which together have less than 100 members in
total. Subject to Article 2(2), such institutions should never-
theless be given the right to apply this Directive on a voluntary
basis. Article 20 may be applied only if all the other provisions
of this Directive apply.

(1) Council Directive 92/96/EEC of 10 November 1992 on the coor-
dination of laws, regulations and administrative provisions relating
to direct life assurance and amending Directives 79/267/EEC and
90/619/EEC (third life assurance Directive) (OJ L 360, 9.12.1992,
p. 1). Directive as last amended by Directive 2000/64/EC.

Member States may choose not to apply Articles 9 to 17 to
institutions where occupational retirement provision is made
under statute, pursuant to legislation, and is guaranteed by a
public authority. Article 20 may be applied only if all the other
provisions of this Directive apply.

Article 6

Definitions

For the purposes of this Directive:

(a)

‘institution for occupational retirement provision’, or ‘insti-
tution’, means an institution, irrespective of its legal form,
operating on a funded basis, established separately from
any sponsoring undertaking or trade for the purpose of
providing retirement benefits in the context of an occupa-
tional activity on the basis of an agreement or a contract
agreed:

— individually or collectively between the employer(s) and
the employee(s) or their respective representatives, or

— with self-employed persons,

in compliance with the

legislation of the home and host Member States

and which carries out activities directly arising therefrom;

(b) ‘pension scheme’ means a contract, an agreement, a trust
deed or rules stipulating which retirement benefits are
granted and under which conditions;

(c)

(d)

‘sponsoring undertaking’ means any undertaking or other
body, regardless of whether it includes or consists of one or
more legal or natural persons, which acts as an employer
or in a self-employed capacity or any combination thereof
and which pays contributions into an institution for occu-
pational retirement provision;

in the

‘retirement benefits’ means benefits
form of
payments, whether for life time, for a temporary period
or as a lump sum, paid by reference to reaching, or the
expectation of reaching, retirement or, where they are
supplementary to those benefits and provided on an
ancillary basis, in the form of payments on death, disability,
or cessation of employment or in the form of support
payments or services in case of sickness,
indigence or
death;

(e)

‘member’ means a person whose occupational activities
entitle or will entitle him/her to retirement benefits in
accordance with the provisions of a pension scheme;

3.12.2002

EN

Official Journal of the European Communities

C 299 E/21

(f)

‘beneficiary’ means a person receiving retirement benefits;

(g)

‘competent authorities’ means
the national authorities
designated to carry out the duties provided for in this
Directive;

(h) ‘biometrical risks’ mean risks linked to death, disability and

longevity;

(i)

(j)

‘home Member State’ means the Member State in which the
institution has its registered office and its main adminis-
tration or, if it does not have a registered office, its main
administration;

‘host Member State’ means the Member State whose social
and labour law relevant to the field of occupational pension
schemes is applicable to the relationship between the spon-
soring undertaking and members.

(c) properly constituted rules regarding the functioning of any
pension scheme operated by the institution have been
implemented
adequately
informed of these rules;

and members

been

have

(d) all technical provisions are computed and certified by an
actuary or, if not by an actuary, by another specialist in this
field, including an auditor, according to national legislation,
on the basis of actuarial methods recognised by the
competent authorities of the home Member State;

(e) where the sponsoring undertaking guarantees the payment
is committed to regular

the retirement benefits,

it

of
financing;

(f)

the members are sufficiently informed of the conditions of
the pension scheme, in particular concerning:

Article 7

pension scheme;

(i) the rights and obligations of the parties involved in the

Activities of an institution

Each Member State shall require institutions located within its
territory to limit their activities to retirement-benefit related
operations and activities arising therefrom.

When, in accordance with Article 4, an insurance undertaking
manages its occupational retirement provision business by
ring-fencing its assets and liabilities,
the ring-fenced assets
and liabilities shall be restricted to retirement-benefit related
operations and activities directly arising therefrom.

Article 8

Legal separation between sponsoring undertakings and
institutions for occupational retirement provision

Each Member State shall ensure that there is a legal separation
between a sponsoring undertaking and an institution for occu-
pational retirement provision in order that the assets of the
institution are safeguarded in the interests of members and
beneficiaries in the event of bankruptcy of the sponsoring
undertaking.

(ii) the financial, technical and other risks associated with

the pension scheme;

(iii) the nature and distribution of those risks.

A Member State may make the conditions of operation of
2.
an institution located in its
to other
requirements, with a view to ensuring that the interests of
members and beneficiaries are adequately protected.

territory subject

A Member State may permit or

3.
require institutions
located in its territory to entrust management of these insti-
in whole or in part, to other entities operating on
tutions,
behalf of those institutions.

4.
In the case of cross-border activity as referred to in
Article 20, the conditions of operation of the institution shall
be subject to a prior authorisation by the competent authorities
of the home Member State.

Article 9

Conditions of operation

Each Member State shall, in respect of every institution

1.
located in its territory, ensure that:

(a) the institution is registered or authorised;

(b) the institution is effectively run by persons of good repute
who must themselves have appropriate professional qualifi-
cations and experience or employ advisers with appropriate
professional qualifications and experience;

Article 10

Annual accounts and annual reports

Each Member State shall require that every institution located
in its territory draw up annual accounts and annual reports
taking into account each pension scheme operated by the
institution and, where applicable, annual accounts and annual
reports for each pension scheme. The annual accounts and the
annual reports shall give a true and fair view of the institution's
assets,
liabilities and financial position. The annual accounts
and information in the reports shall be consistent, compre-
hensive,
fairly presented and duly approved by authorised
persons, according to national law.

C 299 E/22

EN

Official Journal of the European Communities

3.12.2002

Article 11

Information to be given to the members and beneficiaries

1.
Depending on the nature of the pension scheme estab-
lished, each Member State shall ensure that every institution
located in its territory provides at least the information set out
in this Article.

2. Members and beneficiaries and/or, where applicable, their
representatives shall receive:

(a) on request, the annual accounts and the annual reports
referred to in Article 10; and where an institution is
responsible for more than one scheme, those relating to
their particular pension scheme;

(b) within a

reasonable

time,

any

relevant

information

regarding changes to the pension scheme rules.

3.
The statement of investment policy principles, referred to
in Article 12, shall be made available to members and bene-
ficiaries and/or, where applicable, to their representatives on
request.

Each member shall also receive, on request, detailed and

4.
substantial information on:

(a) the target level of the retirement benefits, if applicable;

investment risk measurement methods, the risk management
processes implemented and the strategic asset allocation with
respect to the nature and duration of pension liabilities.

Article 13

Information to be provided to the competent authorities

Each Member State shall ensure that the competent authorities,
in respect of any institution located in its territory, have the
necessary powers and means:

(a) to require the institution, the members of its board of
directors and other managers or directors or persons
controlling the institution to supply information about all
business matters or forward all business documents;

(b) to supervise relationships between the institution and other
companies or between institutions, when institutions
transfer functions to those other companies or institutions
the
(outsourcing),
influencing the financial situation of
institution or being in a material way relevant
for
effective supervision;

(c)

to obtain regularly the statement of investment policy prin-
ciples, the annual accounts and the annual reports, and all
the documents necessary for the purposes of supervision.
These may include documents such as:

(b) the actual financing of accrued pension entitlements;

(i) internal interim reports;

(c) the level of benefits in case of cessation of employment;

(ii) actuarial valuations and detailed assumptions;

(d) where the member bears the investment risk, the range of
investment options, if applicable, and the actual investment
portfolio as well as information on risk exposure and costs
related to the investments.

(iii) asset-liability studies;

5.
Each beneficiary shall receive, on retirement or when
other benefits become due, the appropriate information on
the benefits which are due and the corresponding payment
options.

Article 12

Statement of investment policy principles

Each Member State shall ensure that every institution located in
its territory prepares, and at least every three years reviews, a
written statement of
investment policy principles. This
statement is to be revised without delay after any significant
change in the investment policy. Member States shall provide
least, such matters as the
that

this statement contains, at

(iv) evidence of consistency with the investment policy

principles;

(v) evidence that contributions have been paid in as

planned;

(vi) reports by the persons responsible for auditing the

annual accounts referred to in Article 10;

(d) to carry out on-site inspections at the institution's premises
and, where appropriate, on outsourced functions to check
if activities are carried out in accordance with the super-
visory rules.

3.12.2002

EN

Official Journal of the European Communities

C 299 E/23

Article 14

Powers of intervention and duties of the competent
authorities

The competent authorities shall require every institution
1.
located in their territories to have sound administrative and
accounting procedures and adequate internal control mech-
anisms.

2.
The competent authorities shall have the power to take
any measures including, where appropriate, those of an admin-
istrative or financial nature, either with regard to any insti-
the persons
tution located in their
running the institution, which are appropriate and necessary
to prevent or remedy any irregularities prejudicial
to the
interests of the members and beneficiaries.

territories or against

They may also restrict or prohibit the free disposal of the
institution's assets when, in particular:

(a) the institution has failed to establish sufficient technical
provisions in respect of the entire business or has insuf-
ficient assets to cover the technical provisions;

(b) the institution has failed to hold the regulatory own funds.

3.
In order to safeguard the interests of members and bene-
ficiaries, the competent authorities may transfer the powers
which the persons running an institution located in their terri-
tories hold in accordance with the law of the home Member
State wholly or partly to a special representative who is fit to
exercise these powers.

The competent authorities may prohibit or restrict the
in

4.
activities of an institution located in their
particular if:

territories

provisions adopted in accordance with this Directive are
subject to the right to apply to the courts.

Article 15

Technical provisions

1.
The home Member State shall ensure that institutions
operating occupational pension schemes establish at all times
in respect of the total range of their pension schemes an
adequate amount of liabilities corresponding to the financial
commitments which arise out of their portfolio of existing
pension contracts.

2.
The home Member State shall ensure that institutions
operating occupational pension schemes, where they provide
cover against biometric risks and/or guarantee either an
investment performance or a given level of benefits, establish
sufficient technical provisions in respect of the total range of
these schemes.

3.
The calculation of technical provisions shall take place
every year. However, the home Member State may allow a
calculation once every three years if the institution provides
members and/or the competent authorities with a certification
or a report of adjustments for the intervening years. The certifi-
cation or the report shall reflect the adjusted development of
the technical provisions and changes in risks covered.

The calculation of

the technical provisions

4.
shall be
executed and certified by an actuary or, if not by an actuary,
in this
by another
including an auditor,
specialist
legislation, on the basis of actuarial
according to national
methods
the
home Member State, according to the following principles:

recognised by the competent authorities of

field,

(a) the institution fails to adequately protect the interests of

members and beneficiaries;

(b) the institution no longer fulfils the conditions of operation;

(c) the institution fails seriously in its obligations under the

rules to which it is subject;

(d) in the case of cross-border activity, the institution does not
respect the requirements of social and labour law of the
host Member State relevant to the field of occupational
pensions.

Any decision to prohibit the activities of an institution shall be
supported by precise reasons and notified to the institution in
question.

(a) the minimum amount of the technical provisions shall be
calculated by a sufficiently prudent actuarial valuation,
taking account of all commitments for benefits and for
contributions in accordance with the pension arrangements
of the institution. It must be sufficient both for pensions
and benefits already in payment to beneficiaries to continue
to be paid, and to reflect the commitments which arise out
of members' accrued pension rights. The economic and
actuarial assumptions chosen for
the
liabilities shall also be chosen prudently taking account, if
applicable, of an appropriate margin for adverse deviation;

the valuation of

(b) the maximum rates of

interest used shall be chosen
and determined in accordance with any
prudently
relevant rules of the home Member State. These prudent
rates of interest shall be determined by taking into account:

— the yield on the corresponding assets held by the insti-

tution and the future investment returns and/or

5. Member States shall ensure that decisions taken in respect
of an institution under laws, regulations and administrative

— the market yields of high quality or government bonds;

C 299 E/24

EN

Official Journal of the European Communities

3.12.2002

(c) the biometric tables used for the calculation of technical
provisions shall be based on prudent principles, having
the group of
regard to the main characteristics of
members and the pension schemes,
the
expected changes in the relevant risks;

in particular

(c)

(d) the method and basis of calculation of technical provisions
shall in general remain constant from one financial year to
another. However, discontinuities may be justified by a
change of legal, demographic or economic circumstances
underlying the assumptions.

5.
The home Member State may make the calculation of
technical provisions subject to additional and more detailed
requirements, with a view to ensuring that the interests of
members and beneficiaries are adequately protected.

6. With a view to further harmonisation of
the rules
regarding the calculation of technical provisions which may
the interest-rates and other
be justified — in particular
assumptions influencing the level of technical provisions —
the Commission will, every two years or at the request of a
Member State, report to the Insurance and Pension Committee
on the situation concerning the development in cross-border
the Insurance and Pension
activities. After consultation of
Committee,
the Commission will propose any necessary
measures to prevent possible distortions caused by different
levels of interest rates and to protect the interest of bene-
ficiaries and members of any scheme.

Article 16

Funding of technical provisions

1.
The home Member State shall require every institution to
have at all times sufficient and appropriate assets to cover the
technical provisions in respect of the total range of pension
schemes operated.

2.
The home Member State may allow an institution, for a
limited period of time, to have insufficient assets to cover the
technical provisions.
In this case the competent authorities
shall require the institution to adopt a concrete and realisable
recovery plan in order to ensure that
the requirements of
paragraph 1 are met again. The plan shall be subject to the
following conditions:

(a) the institution shall set up a concrete and realisable plan to
re-establish the required amount of assets to cover fully the
technical provisions in due time. The plan shall be made
available
to their
to members or, where applicable,
representatives and/or shall be subject to approval by the
competent authorities of the home Member State;

the members entitled to receive retirement benefits,
of
start-up schemes and schemes changing from non-funding
or partial funding to full funding;

inform the competent authorities of

in the event of termination of a pension scheme during the
period referred to above in this paragraph the institution
shall
the home
Member State. The institution shall establish a procedure
in order to transfer the assets and the corresponding
liabilities
institution or a similar
body. This procedure shall be disclosed to the competent
authorities of the home Member State and/or a general
the procedure shall be made available to
outline of
members or, where applicable, to their representatives in
accordance with the principle of confidentiality.

to another

financial

In the event of cross-border activity as referred to in
3.
Article 20, the technical provisions shall at all times be fully
funded in respect of
the total range of pension schemes
operated. If these conditions are not met, the competent auth-
orities of the home Member State shall intervene in accordance
with Article 14. To comply with this requirement the home
Member State may require ring-fencing of
the assets and
liabilities.

Article 17

Regulatory own funds

1.
The home Member State shall ensure that institutions
operating pension schemes, where the institution itself, and
not the sponsoring undertaking, underwrites the liability to
cover against biometric risk, or guarantees a given investment
performance or a given level of benefits, hold on a permanent
basis additional assets above the technical provisions to serve
as a buffer. The amount thereof shall reflect the type of risk
and asset base in respect of
the total range of schemes
operated. These assets shall be free of all foreseeable liabilities
and serve as a safety capital to absorb discrepancies between
the anticipated and the actual expenses and profits.

2.
For the purposes of calculating the minimum amount of
the additional assets, the rules laid down in Articles 18 and 19
of Directive 79/267/EEC shall apply.

3.
Paragraph 1 shall, however, not prevent Member States
from requiring institutions located in their territory to hold
regulatory own funds or from laying down more detailed
rules provided that they are prudentially justified.

Article 18

Investment rules

(b) in drawing up the plan, account shall be taken of the
specific situation of the institution, in particular the asset/
liability structure, risk profile, liquidity plan, the age profile

1. Member States shall require institutions located in their
territories to invest in accordance with the ‘prudent person’
rule and in particular in accordance with the following rules:

3.12.2002

EN

Official Journal of the European Communities

C 299 E/25

(a) the assets shall be invested in the best interests of members
and beneficiaries.
In the case of a potential conflict of
interest the institution, or the entity which manages its
portfolio, shall ensure that the investment is made in the
sole interest of members and beneficiaries;

carry out some borrowing only for liquidity purposes and on a
temporary basis.

3. Member States shall not require institutions located in
their territory to invest in particular categories of assets.

(b) the assets shall be invested in such a manner as to ensure
the

liquidity and profitability of

the security, quality,
portfolio as a whole.

Assets held to cover the technical provisions shall also be
invested in a manner appropriate to the nature and
duration of the expected future retirement benefits;

(c) the assets shall be predominantly invested on regulated
markets. Investment in assets which are not admitted to
trading on a regulated financial market must in any event
be kept to prudent levels;

(d) investment

in derivative instruments

shall be possible
insofar as they contribute to a reduction of investment
risks or facilitate efficient portfolio management. They
must be valued on a prudent basis, taking into account
the underlying asset, and included in the valuation of the
institution's assets. The institution shall also avoid excessive
risk exposure to a single counterparty and to other
derivative operations;

(e) the assets shall be properly diversified in such a way as to
avoid excessive reliance on any particular asset, issuer or
group of undertakings and accumulations of risk in the
portfolio as a whole.

Investments in assets issued by the same issuer or by
issuers belonging to the same group shall not expose the
institution to excessive risk concentration;

(f)

investment in the sponsoring undertaking shall be no more
than 5 % of the portfolio as a whole and, when the spon-
soring undertaking belongs to a group, investment in the
undertakings belonging to the same group as the spon-
soring undertaking shall not be more than 10 % of the
portfolio.

When the institution is sponsored by a number of under-
takings, investment in these sponsoring undertakings shall
be made prudently, taking into account the need for proper
diversification.

Member States may decide not
to apply the requirements
referred to in points (e) and (f) to investment in government
bonds.

2.
The home Member State shall prohibit the institution
from borrowing or acting as a guarantor on behalf of third
parties. However, Member States may authorise institutions to

4. Without prejudice to Article 12, Member States shall not
subject the investment decisions of an institution located in
their territory or its investment manager to any kind of prior
approval or systematic notification requirements.

In accordance with the provisions of paragraphs 1 to 4,
5.
Member States may, for the institutions located in their terri-
including quantitative
tories,
rules, provided they are prudentially justified to reflect
the
total range of pension schemes operated by these institutions.

lay down more detailed rules,

In particular, Member States may apply investment provisions
similar to those of Directive 92/96/EEC.

Member States shall, however, not prevent institutions from:

(a)

investing up to 70 % of the assets covering the technical
provisions or of the whole portfolio for schemes in which
the members bear the investment risks in shares, negotiable
securities treated as shares and corporate bonds admitted to
trading on regulated markets and deciding on the relative
weight of
these securities in their investment portfolio.
Provided it is prudentially justified, Member States may
however apply a lower limit to institutions which provide
retirement products with a
rate
risk and themselves
guarantee, bear
provide for the guarantee;

long-term interest

investment

the

(b) investing up to 30 % of

the assets covering technical
provisions in assets denominated in currencies other than
those in which liabilities are expressed;

(c)

investing in risk capital markets.

Paragraph 5 shall not preclude the right

6.
for Member
States to require the application to institutions located in
their territory of more stringent investment rules also on an
individual basis provided they are prudentially justified,
in
particular in the light of the liabilities entered into by the
institution.

7.
In the event of cross-border activity as referred in Article
20, the competent authorities of each host Member State may
require that the rules set out in the second subparagraph apply
to the institution in the home Member State. In such case,
these rules shall apply only to the part of the assets of the
institution that corresponds to the activities carried out in the
particular host Member State. Furthermore, they shall only be
applied if the same or stricter rules also apply to institutions
located in the host Member State.

C 299 E/26

EN

Official Journal of the European Communities

3.12.2002

The rules referred to in the first subparagraph are as follows:

(a) the institution shall not invest more than 30 % of these
assets in shares, other securities treated as shares and
debt securities which are not admitted to trading on a
regulated market or the institution shall
least
70 % of these assets in shares, other securities treated as
shares, and debt securities which are admitted to trading on
a regulated market;

invest at

(b) the institution shall invest no more than 5 % of these assets
in shares and other securities treated as shares, bonds, debt
securities and other money and capital-market instruments
issued by the same undertaking and no more than 10 % of
these assets in shares and other securities treated as shares,
bonds, debt securities and other money and capital market
instruments issued by undertakings belonging to a single
group;

(c) the institution shall not invest more than 30 % of these
assets in assets denominated in currencies other
than
those in which the liabilities are expressed.

To comply with these requirements, the home Member State
may require ring-fencing of the assets.

Article 19

Management and custody

restrict

shall not

1. Member States
from
appointing, for the management of the investment portfolio,
investment managers established in another Member State and
duly authorised for this activity, in accordance with Directives
85/611/EEC, 92/96/EEC, 93/22/EEC and 2000/12/EC, as well
as those referred to in Article 2(1) of this Directive.

institutions

restrict

shall not

2. Member States
from
appointing, for the custody of their assets, custodians estab-
lished in another Member State and duly authorised in
accordance with Directive 93/22/EEC or Directive 2000/12/EC,
or accepted as a depositary for the purposes of Directive
85/611/EEC.

institutions

The provision referred to in this paragraph shall not prevent
the home Member State from making the appointment of a
depositary or a custodian compulsory.

Each Member State shall

take the necessary steps to
3.
enable it under its national
in accordance
with Article 14, the free disposal of assets held by a depositary
or custodian located within its territory at the request of the
institution's home Member State.

law to prohibit,

Article 20

Cross-border activities

1. Without prejudice to national social and labour legis-
including
lation on the organisation of pension systems,

compulsory membership and the outcomes of collective
bargaining agreements, Member States shall allow undertakings
located within their territories to sponsor institutions for occu-
pational
retirement provision authorised in other Member
States. They shall also allow institutions for occupational
retirement provision authorised in their territories to accept
sponsorship by undertakings located within the territories of
other Member States.

located within the

An institution wishing to accept sponsorship from a
2.
sponsoring undertaking
territory of
another Member State shall be subject to a prior authorisation
by the competent authorities of its home Member State, as
referred to in Article 9(4).
It shall notify its intention to
accept sponsorship from a sponsoring undertaking located
within the
to the
competent authorities of the home Member State where it is
authorised.

another Member State

territory of

3. Member States shall require institutions located within
their territories and proposing to be sponsored by an under-
taking located in the territory of another Member State to
provide the following information when effecting a notification
under paragraph 2:

(a) the host Member State(s);

(b) the name of the sponsoring undertaking;

(c)

the main characteristics of
operated for the sponsoring undertaking.

the pension scheme to be

4. Where a competent authority of the home Member State
is notified under paragraph 2, and unless it has reason to doubt
that the administrative structure or the financial situation of
the institution or the good repute and professional qualifi-
cations or experience of the persons running the institution
are compatible with the operations proposed in the host
it shall within three months of receiving all
Member State,
the information referred to in paragraph 3 communicate that
information to the competent authorities of the host Member
State and inform the institution accordingly.

5.
Before the institution starts to operate a pension scheme
for a sponsoring undertaking in another Member State, the
competent authorities of the host Member State shall, within
receiving the information referred to in
two months of
inform the competent authorities of the home
paragraph 3,
Member State,
if appropriate, of the requirements of social
and labour law relevant to the field of occupational pensions
under which the pension scheme sponsored by an undertaking
in the host Member State must be operated and any rules that
are to be applied in accordance with Article 18(7) and with
paragraph 7 of this Article. The competent authorities of the
home Member State shall communicate this information to the
institution.

3.12.2002

EN

Official Journal of the European Communities

C 299 E/27

the home Member State on expiry of

On receiving the communication referred to in paragraph
6.
5, or if no communication is received from the competent
authorities of
the
period provided for in paragraph 5, the institution may start
to operate the pension scheme sponsored by an undertaking in
the host Member State in accordance with the host Member
State's requirements of social and labour law relevant to the
field of occupational pensions, and any rules that are to be
applied in accordance with Article 18(7) and with paragraph
7 of this Article.

Article 21

Cooperation between Member States and the Commission

in an appropriate manner,
1. Member States shall ensure,
this Directive through regular
the uniform application of
exchanges of
information and experience with a view to
developing best practices in this sphere and closer cooperation,
and by so doing, preventing distortions of competition and
creating the conditions required for unproblematic cross-border
membership.

In particular, an institution sponsored by an undertaking
7.
in
located in another Member State shall also be subject,
to any information
respect of
requirements imposed by the competent authorities of
the
host Member State on institutions located in that Member
State, in accordance with Article 11.

the corresponding members,

The competent authorities of the host Member State shall
8.
inform the competent authorities of the home Member State of
any significant change in the host Member State's requirements
of social and labour law relevant to the field of occupational
pension schemes which may affect the characteristics of the
pension scheme insofar as it concerns the operation of the
pension scheme sponsored by an undertaking in the host
Member State and in any rules that have to be applied in
accordance with Article 18(7) and with paragraph 7 of this
Article.

The institution shall be subject to ongoing supervision by
9.
the competent authorities of the host Member State as to the
compliance of
its activities with the host Member State's
requirements of labour and social law relevant to the field of
occupational pension schemes referred to in paragraph 5 and
with the information requirements referred to in paragraph 7.
Should this
the
supervision bring irregularities
competent authorities of the host Member State shall inform
the
the home Member State
immediately. The competent authorities of the home Member
State shall, in coordination with the competent authorities of
the host Member State, take the necessary measures to ensure
that the institution puts a stop to the detected breach of social
and labour law.

authorities of

competent

to light,

and labour
to the field of occupational pension schemes,

If, despite the measures taken by the competent auth-
10.
orities of
the home Member State or because appropriate
measures are lacking in the home Member State, the institution
the host
persists in breaching the applicable provisions of
law
Member State's
requirements of
relevant
the
competent authorities of the host Member State may, after
informing the competent authorities of
the home Member
State,
to prevent or penalise
take appropriate measures
further irregularities, including, insofar as is strictly necessary,
preventing the institution from operating in the host Member
State for the sponsoring undertaking.

social

2.
The Commission and the competent authorities of the
Member States shall collaborate closely with a view to facili-
tating supervision of the operations of institutions for occupa-
tional retirement provision.

Each Member State shall inform the Commission of any major
difficulties to which the application of this Directive gives rise.

The Commission and the competent authorities of the Member
States concerned shall examine such difficulties as quickly as
possible in order to find an appropriate solution.

Five years after the entry into force of
Commission shall issue a report reviewing:

this Directive,

the

(a) the application of Article 18 and the progress achieved in

the adaptation of national supervisory systems, and

(b) the application of

the second subparagraph of Article
19(2),
in particular the situation prevailing in Member
States regarding the use of depositaries and the role
played by them where appropriate.

The Commission shall also be assisted by an Insurance and
Pension Committee.

3.
The competent authorities of the host Member State may
ask the competent authorities of the home Member State to
the institution's assets and
decide on the ring-fencing of
liabilities, as provided for in Articles 16(3) and 18(7).

Article 22

Implementation

1. Member States shall bring into force the laws, regulations
and administrative provisions necessary to comply with this
Directive before . . . (*). They shall
forthwith inform the
Commission thereof.

(*) 24 months from the date of the entry into force of this Directive.

C 299 E/28

EN

Official Journal of the European Communities

3.12.2002

When Member States adopt these measures, they shall contain
a reference to this Directive or shall be accompanied by such
reference on the occasion of their official publication. The
methods of making such reference shall be laid down by
Member States.

However, institutions wishing to operate pension schemes on a
cross-border basis, within the meaning of Article 20, may not
do so until they comply with the rules of this Directive.

2. Member States shall communicate to the Commission the
text of the main provisions of national law which they adopt in
the field governed by this Directive.

Article 23

Entry in force

This Directive shall enter into force on the day of its publi-
cation in the Official Journal of the European Communities.

3. Member States may postpone until . . . (*) the application
of Article 17(1) and (2) to institutions located in their territory
which at the date specified in paragraph 1 do not have the
minimum level of regulatory own funds required pursuant to
Article 17(1) and (2). However, institutions wishing to operate
pension schemes on a cross-border basis, within the meaning
of Article 20, may not do so until they comply with the rules
of this Directive.

Article 24

Addressees

This Directive is addressed to the Member States.

Done at . . .

4. Member States may postpone until . . . (*) the application
to institutions located in their territory.
of Article 18(1)(f)

For the European Parliament

The President

For the Council

The President

(*) 5 years from the date referred to in paragraph 1.

3.12.2002

EN

Official Journal of the European Communities

C 299 E/29

STATEMENT OF THE COUNCIL'S REASONS

I. INTRODUCTION

1. On 13 November 2000, the Commission submitted a proposal for a directive on the activities of

institutions for occupational retirement provision (1).

2. The Economic and Social Committee delivered its opinion on 28 March 2001 (2).

3. On 4 July 2001, the European Parliament adopted its opinion containing 99 amendments to the

Commission proposal (3).

4. On 5 November 2002, the Council adopted its common position and these reasons.

II. OBJECTIVES

1. When putting forward its proposal, the Commission stated as its objectives:

— to ensure that investments are secure and efficient,

— to enable institutions to choose their asset managers and custodians freely,

— to ensure a level playing field between all service providers,

— to facilitate cross-border activities,

— to ensure the protection of present and future pensioners,

— to build a single market for financial services,

— in particular for supplementary pensions.

According to the Commission proposal, these objectives are to be achieved by establishing a scope
that does not interfere in the organisation of Member States' pension systems while ensuring
consistency with other financial services legislation and taking into account national diversity
while ensuring a high level of protection.

2. In principle, the Council can subscribe to the objectives of the Commission proposal. However, the
Council differs from the proposal in its view of their relative importance as well as the means to
achieve them, and is of the opinion that some of the objectives are immediate, others for the longer
term. It has been of paramount importance to the Council that Member States should retain full
responsibility for the organisation of their pension systems as well as for the decision on the role of
each of the three ‘pillars’ of the retirement system. These views have led the Council to modify the
Commission proposal on a number of points as outlined in the following section, in many cases
drawing directly or indirectly on the amendments of the European Parliament. As a result, the
Council believes that its common position is more balanced than the Commission proposal and
that it adequately respects the principle of subsidiarity and addresses the concerns of Member States,
the European Parliament and the Commission.

III. MODIFICATIONS

A. Title

The Council shares the view of the European Parliament (in its amendment 1) that the title
proposed by the Commission is overly restrictive and potentially misleading. The common
position therefore refers in its title not only to the activities of institutions for occupational
retirement provision, but also to their supervision.

(1) OJ C 96 E, 27.3.2001, p. 136.
(2) OJ C 155, 29.5.2001, p. 26.
(3) OJ C 65 E, 14.3.2002, p. 116.

C 299 E/30

EN

Official Journal of the European Communities

3.12.2002

B. Scope

The Commission proposal did not adequately cover institutions without legal personality. However,
in a number of Member States institutions without legal personality can also provide occupational
retirement services. The Council has chosen to take this into account in an addition to Article 2(1)
using parts of amendment 33 of the European Parliament, which had also recognised this ambiguity
in the Commission proposal.

In Article 2(2)(a), the Council has deleted the reference to Annex II to Council Regulation (EEC)
No 1408/71, which it found misleading since Article 2(2) excludes certain institutions from the
scope, and in Article 2(2)(b) it has added a reference to the non-life insurance directive 73/239/EEC
as a complement to the already existing reference to the life assurance directive 79/267/EEC.

In Article 2(2)(d), the Council feels that the reference to ‘German Unterstützungskassen and other
institutions operating in a similar way’ as proposed by the Commission was at the same time too
restrictive and precariously vague and has therefore replaced it with a factual description of what
Unterstützungskassen are.

As for the rest of Article 2, the Council
is of the opinion that the scope proposed by the
Commission is appropriate and respects each Member State's organisation of its pension system.

C.

Institutions operating social security schemes; insurance undertakings; de minimis rules

institutions operate
In Article 3 the Council agrees with the Commission proposal
compulsory social security schemes as well as non-compulsory occupational retirement provision
schemes, the directive should apply to the latter schemes, provided however that assets and
liabilities are ring-fenced and non-transferable between compulsory and non-compulsory schemes.
The Council has not accepted amendment 34 of the European Parliament since it would be
imprudent to refer to all activities falling outside the two social security regulations.

that

if

In Article 4, the Council has applied the same logic as in Article 3 to life assurance undertakings
also operating occupational retirement provision schemes. Provided that the retirement provision
business is ring-fenced and organised and managed separately without any possibility of transfer,
home Member States have the option to apply relevant provisions of this directive. Contrary to the
Commission proposal, the Council is of the opinion that Articles 9 to 16 and 18 to 20 are relevant,
i.e. that three articles (on operating conditions; accounts and reports; and cross-border activities) not
proposed by the Commission should also apply if Member States use this option.

In so doing, the Council has taken on board parts of amendment 120 of the European Parliament,
with the exception that the Council does not share the view of the European Parliament that Article
17 on regulatory own funds is applicable if Member States use the option referred to above (on the
other hand, amendments 122 and 13 of the European Parliament have not been included). Finally,
the Council has included the requirement in amendment 36 of the European Parliament for the
strict separation of businesses to be verified by an authority in the Member State in question.
However, the Council has taken a more flexible approach than the European Parliament by recog-
nising — in keeping with the policy of not interfering with Member States' pension systems — that
it may in some instances be more natural for supervisory authorities in the insurance field to ensure
this separation than for the competent authorities designated under this directive. Recital 15 has
been aligned on the new wording of Article 4 using amendment 17 of the European Parliament.

In Article 5 on small schemes and statutory schemes, the Council has adopted the approach of the
European Parliament in its amendment 37 to make Article 19 on management and custody
applicable even if a Member State has exempted institutions from one or more of the other
provisions of the directive due to the small size of their schemes. As a consequence, it has also
adapted recital 12 to the spirit of amendment 15 of the European Parliament. However, the Council
does not share the view of the European Parliament that the threshold for the possibility of
exempting institutions should be set at 50 persons. Instead, the Council prefers 100 persons as
proposed by the Commission.

3.12.2002

EN

Official Journal of the European Communities

C 299 E/31

Finally, the Council considers it useful to add two new elements to Article 5. In the case where a
Member State has chosen to exempt small institutions from one or more provisions of the directive,
such an institution should nevertheless have the possibility to apply the directive on a voluntary
basis, e.g. for the purpose of cross-border activities. Secondly, the Council wishes to make it clear
that institutions exempted from Articles 9 to 17 because they have a statutory obligation to provide
occupational retirement benefits cannot undertake cross-border activities.

D. Definitions

The definition of institutions for occupational retirement provision in Article 6(a) is central to the
directive and the Council believes that the Commission proposal by and large contains a workable
definition. However, the Council objects to direct individual membership being part of the defi-
nition and thereby falling within the scope of the directive. It also feels that two of the three
in its amendment 38 improve the definition.
changes proposed by the European Parliament
Consequently, the Council makes it clear that
(to
the legal
address the possibility of institutions without legal personality as described in section B above).
Moreover, the Council agrees with the Parliament that occupational retirement provision need not
be the only purpose of the institution, as long as it carries out activities arising therefrom. As a
consequence, the Council has also partly included amendment 16 of the European Parliament in
recital 14.

institutions is irrelevant

form of

As regards the definition of sponsoring undertakings in Article 6(c), the Council shares the view of
the European Parliament that the Commission proposal does not adequately address the situation of
individuals and self-employed acting as sponsors. It has therefore extended the definition along the
lines of amendment 40 of the European Parliament.

In the definition of retirement benefits in Article 6(d), the Council shares the view of the European
Parliament that the Commission proposal gives undue prominence to death, disability and cessation
of employment over what
the Council considers the natural starting point, namely reaching
it has
retirement. In the same line of thought as amendment 41 of the European Parliament,
therefore reversed the order of these elements, making clear that benefits paid out on death,
disability or cessation of employment only fall under the definition of retirement benefits if they
are supplementary to benefits paid out in connection with reaching retirement.

On the other hand, the Council has not been able to accept the part of amendment 41 stating
life-long financial provision as the purpose of retirement benefits, which the Council fears would
make the definition unnecessarily restrictive and would interfere with the organisation of national
pension systems. Nor has it therefore included amendment 18 of the European Parliament.

In order not to include family members and other possible beneficiaries in the definition of
members, the Council has narrowed it down to persons entitled to benefits by virtue of their
occupational activities. The Council has also shortened and clarified the definition of biometrical
risk and deleted the definitions of risk capital markets and location.

In the definition of home Member State in Article 6(i), the Council has replaced ‘is located’ with
more precise references to where the registered office and main administration are. Furthermore, it
considered it useful to link the definition of host Member State in Article 6(j) to the applicable
social and labour law. The Council has not been prepared to accept amendment 42 of the European
Parliament as it found it unclear exactly from what competent authorities should be independent.

E. Activities and conditions of operation

In Article 7 on the activities of institutions, the Council has taken up the underlying idea of
amendment 46 of the European Parliament concerning the restrictions placed on ring-fenced
assets and liabilities. However, the Council is of the opinion that nowhere is the importance of
ring-fencing greater than in the situation described in Article 4 whereby an insurance undertaking
also operates occupational retirement provision schemes. It has therefore chosen to make specific
reference to Article 4.

C 299 E/32

EN

Official Journal of the European Communities

3.12.2002

In Article 9 on operating conditions, the Council feels that the addition proposed by the European
Parliament in its amendment 47 is a useful precision and has therefore included it in several places
in Article 9 and elsewhere (albeit in a modified form). It also shares the view of the European
Parliament that the registration requirement proposed by the Commission is not sufficient in all
Member States, and has therefore added ‘or authorised’, which it believes captures the spirit of
amendment 124 of the European Parliament. However, it does not share the view of the European
Parliament that definitions of registration and authorisation (amendments 123 and 45 respectively)
are called for. It also fails to see the point of adding a condition to make arrangements for the
participation of members and beneficiaries in accordance with relevant national provisions, because
relevant national provisions that are part of social and labour law will automatically apply to
pension institutions operating across borders. It has therefore not taken on board amendments
21 and 49 of the European Parliament.

Whereas the Commission proposal put actuaries on an equal footing with other specialists in the
field when it comes to computing and certifying technical provisions, the Council has a preference
for technical provisions being computed and certified by actuaries. However, as an alternative the
Council has also provided for auditors or other experts in the field to compute and certify the
technical provisions, as long as national legislation in this field and actuarial methods recognised by
the competent authorities are respected.

The Council considers amendments 121, 125 and 126 of the European Parliament inappropriate as
they would require every institution to offer additional benefits to those laid down in the scope of
the directive and in the definition of institutions. Instead, the Council believes that the correct way
to introduce the possibility of such benefits is through the provision in Article 9(2) allowing
Member States to add requirements on a national basis if they desire. In accordance with Article
20(5), institutions operating across borders must then comply with the requirements of the host
Member State in so far as they are part of social and labour law. This principle is also expressed in
the European
recital 34. The Council
Parliament. Nor does the Council believe that amendment 127 to Article 9(4)
is a useful
addition, since it is already laid down in Article 9(1) that institutions must be registered or auth-
orised.

is therefore also unable to accept amendment 51 of

On the other hand, the Council shares the view of the European Parliament on the possibility for
institutions to delegate management functions to other entities and has therefore included the spirit
of amendment 52 in Article 9(3). The Council would however prefer Member States to have
complete freedom to permit or require (or not at all) such delegation.

F. Accounts and reports; information requirements

The Council attaches great importance to the information requirements in Articles 10 to 13 and has
therefore endeavoured to make them more explicit:

— in Articles 10 and 11(2) the Council has underlined the necessity for institutions to consider
every scheme when drawing up annual accounts and annual reports and, in some instances, to
draw up annual accounts and annual reports on a scheme-by-scheme basis;

— the Council has also added requirements for annual accounts and annual reports to be compre-
hensive and fairly presented, and for their approval to be in accordance with national law; this
latter amendment aligns Article 10 on the corresponding provision in Article 9(1) (cf. preceding
section);

— in Article 11(1) the Council has made it possible for Member States to request, and for

institutions to provide, more information than required in the remainder of the Article;

— the Council believes that Article 12(2) of the Commission proposal — a requirement to provide
statements of investment policy principles on request — more naturally forms part of Article 11
on information to be given to members and beneficiaries; it therefore appears in the common
position as Article 11(3) and has been extended to apply also to representatives of members and
beneficiaries;

3.12.2002

EN

Official Journal of the European Communities

C 299 E/33

— the Council has deleted from Article 11(4) the requirement to provide detailed and substantial
information on the target level of benefits with the annual account and annual report, as the
Council
is of the opinion that it is sufficient for such information to be provided only if
requested;

— in Article 11(5) the Council has specified at what point in time beneficiaries are entitled to

information on benefits and payment options;

— the Council has deleted from Article 12 the obligation for institutions to submit to their
competent authorities statements of investment policy principles, attaching more weight to
the availability and regular review of such statements than to their automatic submission;
instead, a provision has been added in Article 13(c) to the effect that competent authorities
must be able to obtain these statements;

— in Article 13(b) on information to be provided in case of outsourcing, the Council prefers the
more general concept of ‘relationships’ to ‘contracts’ as proposed by the Commission as not all
outsourcing is the subject of a contract; moreover, the Council has broadened the scope of the
paragraph to cover also the situation in which an institution outsources functions to another
institution;

— finally,

in Article 13(c)(ii) the Council believes that actuarial assumptions can be of limited
interest unless the underlying detailed assumptions are also included, and Article 13(c)(vi) has
been aligned on the corresponding provisions in Articles 9 and 10 (cf. this and preceding
sections).

the Council has also taken on board
In making the above changes to Articles 10 to 13,
amendments 62, 128 and 54 (albeit in a modified form) of the European Parliament. On the
other hand, the Council has not been able to accept any part of amendments 56-59, 61, 129
and 64 since,
in the opinion of the Council, they would appear to increase the administrative
burden on institutions without bringing any obvious benefits for members and beneficiaries.
Furthermore, being of the opinion that ‘territory’ as proposed by the Commission is the term
normally used in Community legislation and therefore more appropriate than ‘jurisdiction’ as put
forward by the European Parliament in several of its amendments, the Council has not been able to
take on board amendment 53 of the European Parliament.

G. Powers and duties of the competent authorities

The Council has identified the same shortcoming in the title of Article 14 as the European
Parliament in its amendment 66, namely that whereas the article deals with the powers and
duties of competent authorities, the title proposed by the Commission referred only to powers.

In addition to amendment 66, the Council has also taken on board amendments 67 and 69 of the
European Parliament, albeit in a modified form in line with previous sections. The corresponding
parts of amendments 68, 70 and 71 have also been included in a modified form.

Furthermore, the Council considered ‘may’ in Article 14(2) of the Commission proposal ambiguous
and has therefore replaced it with ‘shall have the power to’. It also found it useful to specify that
among the measures competent authorities shall have the power to take are administrative and
financial measures. At the end of the same paragraph, it also wanted to make clear that the two
situations in which assets can be frozen are not an exhaustive list.

In Article 14(3) the Council found the proposal of the Commission inadequate with regard to the
transfer of powers to special representatives. Contrary to the proposal, the Council is of the opinion
that this provision should apply only to powers laid down by the law of the home Member State,
not to powers laid down in the statutes of the institution concerned.

As regards Article 14(5) proposed by the Commission, the Council has transferred it to Article
20(9) as it considers this a more natural place for a provision on powers and duties in the case of
cross-border activities.
In so doing, the Council has also modified and incorporated parts of
amendment 72 of the European Parliament and added a reference to the information requirements
set out in Article 20(7).

C 299 E/34

EN

Official Journal of the European Communities

3.12.2002

Finally, the Council is not in favour of requiring competent authorities to draw up annual activity
reports with detailed information about investigations carried out, as this could prove too onerous
while making ongoing and future investigations more difficult for authorities. Amendment 73 of
the European Parliament is therefore not included in the common position.

H. Technical provisions and own funds

The Council considers the provisions on technical provisions in Articles 15 and 16 of paramount
importance for the prudential supervision of institutions. On the whole it can subscribe to the
principles set out in the Commission proposal, although it believes that the text of the Commission
proposal needs to be complemented and, in some cases, made more precise. For instance, in order
to avoid any ambiguity in connection with cross-border activities the Council has specified
throughout Articles 15 to 17 that the provisions contained therein concern home Member States.
In the same way,
the liabilities and
commitments referred to in Article 15(1) are in respect of the whole range of schemes operated
by an institution, and that the liabilities must correspond to the commitments.

the Council wanted to make it absolutely clear

that

In Article 15(3) the Council has relaxed slightly the requirements linked to the option to extend to
three years the period between recalculating the technical provisions. Rather than require insti-
tutions to certify their adjustments for intervening years, the Council foresees an obligation to
report or certify either to authorities or to members, or both.

Article 15(4) has been aligned on the new wording of Article 9(d) as far as actuaries, auditors and
other specialists are concerned. As regards the principles listed in paragraph 4, the common
position of the Council is considerably more detailed than the Commission proposal on what to
consider when calculating minimum amounts and maximum interest rates. The Council has also
added a subparagraph on the biometric tables to be used and added demographic changes to those
circumstances justifying possible discontinuities in the calculation of technical provisions. On the
other hand, the Council has not considered it necessary to include amendment 74 of the European
Parliament concerning the valuation of any transfer of pension rights, which the Council believes
the paragraph addresses already. Nor can the Council accept deleting Article 15(5), to which it
attaches great importance. Amendment 75 of the European Parliament is therefore rejected as well.

With a view to possible future Commission initiatives in the field of technical provisions on the
basis of experience gained across Member States in implementing this directive and in order to
avoid distortions caused by different levels of interest rates in different Member States, the Council
has also foreseen, in Article 15(6), biennial reports from the Commission to the committee assisting
it in these matters. These reports could be more frequent if requested by one or more Member
States.

Concerning the funding of technical provisions (Article 16), the Council firmly believes that the
general rule should be for institutions to have sufficient assets at all times. To refer in this context to
average assets calculated over a one-year period would, it fears, introduce uncertainty or even a
contradiction into Article 16(1).
the European
Parliament.

therefore cannot accept amendment 76 of

It

On the other hand, the Council has incorporated large parts of amendments 130, 77, 78 and 23 of
the European Parliament concerning the recovery plan to be drawn up in case of momentarily
insufficient assets. In addition, the Council believes that such plans (Article 16(2)(b)) as well as
information regarding the possible termination of schemes (Article 16(2)(c)) should be made
available to the members or their representatives.

The Council
is of the opinion that a stronger funding requirement for institutions involved in
cross-border activities, as proposed by the Commission in Article 16(3), is justified and that the
wording proposed by the European Parliament in its amendments 79 and 22 could be perceived as
weakening this provision. It has therefore not been able to take on board these amendments.
Instead, it felt that the paragraph as put forward by the Commission needed more clarity on the
consequences of breaching it. In such a case, the Council foresees intervention by the competent
authority of the home Member State, which may then require the institution to ring-fence its assets
and liabilities.

3.12.2002

EN

Official Journal of the European Communities

C 299 E/35

As regards Article 17 on regulatory own funds, the Council has taken on board amendment 80 of
the European Parliament, which it
feels is a useful addition to the Commission proposal.
Furthermore, by inserting ‘not the sponsoring undertaking’ it has endeavoured to elucidate what
situations are referred to in paragraph 1. Likewise, in paragraph 2 the Council has clarified that it
refers to minimum amounts and that the relevant provisions of the life assurance directive in this
respect are Articles 18 and 19. In so doing, the Council has partly incorporated amendment 81 of
the European Parliament, but fails to see the justification for the rest of the amendment (or for the
related amendment 24) since the two directives referred to by the European Parliament have been
implemented already in all Member States.

Finally, the Council sees a need for an additional paragraph enabling Member States to lay down
additional requirements and more detailed rules concerning own funds as long as they are
prudentially justified.

I.

Investment rules

Like the technical provisions referred to above, the investment rules to which institutions must
adhere are of utmost importance to the Council, which is why Article 18 has undergone more
changes with respect to the Commission proposal than any other article of the common position.

As a starting point, the Council agrees with the Commission proposal that the so-called prudent
person rule should be the basic principle for all investment rules. However, bearing in mind the
limited experience in several Member States of this rule and misgivings as to whether it is sufficient
on its own in every situation, the Council has firstly identified a need to state clearly what is to be
understood by the prudent person rule (paragraph 1), secondly given Member States the oppor-
tunity to complement it with other rules if necessary (paragraph 5). In this context the following
new features merit particular attention:

— paragraph 1(a) of Article 18 stresses the importance of investments being made in the best

interest of members and beneficiaries;

— paragraph 1(c) specifies that investments should be mainly on regulated markets;

— paragraph 1(d) addresses investments in derivative instruments;

— paragraph 1(e) addresses risk exposure, including risk concentration arising from investments in

assets issued by issuers belonging to the same group;

— paragraph 1(f) puts a ceiling on investment in the sponsoring undertaking as well as in the

group to which the sponsoring undertaking belongs;

— Member States are given an option not to apply the latter two paragraphs to investments in

government bonds;

— paragraph 2 restricts the possibilities for institutions to act as lenders or guarantors;

— paragraph 5 authorises Member States to lay down more detailed rules, including quantitative
rules, as long as they are prudentially justified and subject to subparagraphs (a), (b) and (c)
thereof; in this context particular attention is drawn to the investment rules applicable to life
assurance undertakings;

— paragraph 7 contains three additional investment rules which host Member States may require
institutions to comply with if they are involved in cross-border activities in the host Member
State in question, provided however that the host Member State applies at least the same rules
to its own institutions.

C 299 E/36

EN

Official Journal of the European Communities

3.12.2002

The Council therefore adopts a different approach than the European Parliament, whose solution to
the problem of not all Member States being familiar with the prudent person rule amounted to a
transitional period of up to five years. Consequently, the Council has not been able to incorporate
all European Parliament amendments when redrafting Article 18. It has been possible to accept, in a
modified form, amendments 82, 83, 86, 87 and 89 as well as parts of amendments 25 and 26,
whereas amendments 84 and 85 have not been accepted. Amendment 88 has been taken on board
only insofar as the Commission report is concerned, albeit in a modified form and in the new
Article 21 rather than Article 18. The common position does not however contain the remainder of
amendment 88, nor the related amendment 27.

J. Management and custody

Whilst supporting Article 19 as proposed by the Commission, the Council recognises that the
reference to the UCITS directive put forward by the European Parliament is a useful one,
in
particular in view of
the provisions modified in and added to the UCITS directive by the
amending directive adopted by the European Parliament and the Council and signed on
21 January 2002. It has therefore incorporated into paragraph 1 amendment 90, and into recital
32 parts of amendment 28 on the same subject.

Furthermore, recognising that in some Member States it is compulsory to appoint depositaries and
custodians, the Council has added a provision to that effect in paragraph 2.

Finally, the Council has also added a new paragraph concerning the freezing of assets held by
depositaries and custodians in one Member State at the request of the competent authority of
another Member State.

K. Cross-border activities

The Council regards as one of the most important features of this directive the provisions on
cross-border activities in Article 20. Moreover,
it believes that the provisions proposed by the
Commission are appropriate but that they need to be complemented in some respects. It is also
of the opinion that many of the amendments tabled by the European Parliament are useful additions
to the text proposed by the Commission. For instance, with the new definition of sponsoring
undertakings in Article 6(c) it no longer appears appropriate or necessary to refer to individual
sponsorship in Article 20. These references have therefore been deleted, in line with amendments
91, 92 and 131 of the European Parliament. Also in line with these three amendments, and with
the partially accepted amendment 29, the Council has incorporated into paragraph 2 a requirement
for institutions to be authorised by their home Member State competent authorities before
accepting sponsorship from undertakings in other Member States. On the other hand,
the
Council has not been able to accept amendments 30 and 31 in this context.

The Council has also taken on board, in a modified form, amendments 94 and 132 of the European
Parliament, which it believes are clearer and more precise than the corresponding provisions
proposed by the Commission and also in line with the Council's policy of always respecting the
social and labour law of Member States, as expressed in recital 8.

Furthermore, the Council has combined, in paragraphs 9 and 10, the spirit of amendment 95 with
Article 14(5) as proposed by the Commission (cf. section G above concerning its transfer to Article
20). However, the Council is of the opinion that the withdrawal of authorisation, as proposed by
the European Parliament in amendment 95, should only be considered in extreme cases, and that in
the majority of cases of breach of requirements other measures are more appropriate, as elaborated
in these two paragraphs.

In addition to the above amendments, the Council has modified paragraph 1 to make clear that the
right to sponsor institutions in other Member States is without prejudice to national social and
labour legislation on the organisation of pension systems, including compulsory membership and
the outcome of collective bargaining agreements, partly drawing on amendment 106 of
the
European Parliament. It has also aligned paragraph 3(a) on the new definition of host Member
States, and added references to Articles 18(7) and 20(7) in paragraphs 5, 6, 8 and 9.

3.12.2002

EN

Official Journal of the European Communities

C 299 E/37

L. Concluding provisions

The Council has added an article not originally in the Commission proposal concerning cooperation
between Member States as well as between Member States and the Commission, both of which it
considers essential for the implementation of the directive. The objectives of Article 21 are, firstly,
to identify best practices through information exchange and experience exchange between Member
States and, secondly, to ensure that information relevant to the implementation of the directive
flows freely between Member States and the Commission. To that effect, the Council has endorsed
the ideas launched in amendments 133 and 97 of the European Parliament to set up a committee of
Member States representatives to assist the Commission.

Moreover, the Council shares the concerns expressed by the European Parliament in its amendment
88 that a Commission report on the progress made in adapting national supervisory systems would
be useful. The Council, however, would like the Commission also to report on the application of
the investment rules and on the use of depositaries.

Concerning the implementation of the directive, several Member States have indicated that a
two-year period will be needed, which consequently is the date the Council has opted for in
Article 22. Moreover, the Council has decided to grant transitional periods of up to five years
for the implementation of certain provisions as set out in paragraphs 3 and 4 of Article 22.
However, the Council insists that institutions operating on a cross-border basis must not be the
subject of by such transitional periods.

IV. CONCLUSION

The Council believes that the directive, if adopted along the lines of the common position, would make
a significant contribution to more secure and rewarding future pensions in Europe, while at the same
time expanding and helping construct the single European market for financial services. Whilst recog-
nising that this directive will only take a first step in that direction and that further directives will need
to be adopted in future, the Council is confident that the balance struck in its common position will
enable Member States to implement the directive efficiently and to the benefit of current and future
pension scheme members and beneficiaries.

In modifying the Commission proposal as set out above, the Council is to a large extent in agreement
with the European Parliament. More than half of the 99 amendments of the European Parliament have
been incorporated, either completely, partially or in spirit, into the common position of the Council.