MENU PREVIOUS PAGE SHARE PRINT IORP DIRECTIVE The EU has recently approved a major revision of the EU legislation on workplace pension schemes – the Directive on Institutions for Occupational Retirement Provision. ‘IORP II’, as it is known, was finalised in January 2017. Member States now have until 12 January 2019 to implement it. Early in the process, the Commission was forced to drop controversial plans for a Solvency II-based ‘Holistic Balance Sheet’ approach to pension scheme funding. An alliance of five Governments (UK, Neth, Ger, Ire and Belg) opposed the plans, as did BusinessEurope, ETUC and PensionsEurope. IORP II focuses on the governance of pension schemes and on their communications with individual members. 10 key points on the IORP Directive Mk II This is much more than a revision. It transforms the Directive with extensive new requirements on governance and communications. The number of Articles rises from 24 to 67. There is a significant change to the long-standing rules on funding of cross-border schemes. Article 14.3 still requires these to be fully funded at all times, but the text now continues ‘If this condition is not met, the competent authority of the home Member State shall promptly intervene and require the IORP to immediately draw up appropriate measures and implement them without delay in a way that members and beneficiaries are adequately protected’. This allows cross-border schemes to have deficits and put recovery plans in place. Transfers (all transfers, not just those across borders) will require consent from the transferring IORP’s regulator and authorisation from the receiving IORP’s regulator (Article 12.4c). EIOPA may mediate if the two regulators disagree. The final text addresses one of the concerns raised by the PLSA throughout the negotiation - the proposal that schemes would be deemed ‘cross-border’ simply by virtue of having beneficiaries (as opposed to active members) in another Member State. This would have turned any scheme with pensioners in Spain or another EU country into a cross-border scheme. Recital 14 now states clearly that IORPs will not become ‘cross-border’ simply because they have beneficiaries in another Member State. There is a series of references to environmental, social and governance factors. Article 19.1.b, on investment rules, allows IORPs to take account of these factors within the prudent person rule. Plans to require those who ‘effectively run the scheme’ – pension trustees – to have professional qualifications were blocked during negotiations. There are detailed new governance requirements on risk management, outsourcing and internal audit. Schemes will be compile a new Own Risk Assessment. Schemes will required to have a remuneration policy. The Pension Benefit Statement, which schemes will be required to send to ‘each member’ (including deferred members) at least annually, is detailed in Articles 39 and 40. These now set out a relatively simple list of the required contents. Member States will ‘exchange best practice’ on format and content. Although the Directive introduces the concept of depositories for DC schemes, with responsibility for safekeeping and oversight of assets, the final version leaves it up to Member States to decide whether to make this a requirement The implementation arrangements set out in Article 64 provide for two years from entry into force to full implementation by Member States. By James Walsh Policy Lead: EU & International Keep up with developments in Europe: follow James Walsh on twitter LINKS Text of revised IORP directive - Nov 2016 Draft report for European Parliament, Brian Hayes MEP – July 2015 Fourth Presidency compromise text - 28 Nov 2014 Council Working Group compromise text - 17 September 2014 Draft IORP Directive Mk II – March 2014 (4.7.13) EIOPA discussion paper on sponsor support (4.7.13) Barnier announcement - shelving Pillar I (May 2013) (April 2013) (Nov 2012) EIOPA QIS papers (Oct 2012) (Feb 2012) IORP Directive text (2003) RELATED DOCUMENTS NEW IORP DIRECTIVE CLAUSE BY CLAUSE 29 July 2015 The NAPF has compiled a detailed clause-by-clause analysis of the new IORP Directive, comparing the new proposals with the current legislation that they would replace and commenting on the amended ver... READ MORE NAPF, CBI, TUC LETTER TO STEVE WEBB 30 May 2014 The NAPF has joined forces with the CBI and TUC to write a joint letter to the Pensions Minister, Steve Webb MP, thanking him for his support to date and highlighting some shared points of concern abo... READ MORE NAPF RESPONSE TO EIOPA SPONSOR SUPPORT 31 October 2013 EIOPA is still pressing ahead with its policy development work on the Holistic Balance Sheet. In its response to EIOPA’s latest discussion paper on measurement of sponsor support – a key element of th... READ MORE QUANTITATIVE IMPACT STUDY (QIS) METHODOLOGY: NAPF RESPONSE TO EIOPA CONSULTATION 30 July 2012 The latest round in the long-running battle over reform of the main EU pensions Directive is a consultation by the EU pensions regulator, EIOPA, on how it should go about a major ‘Quantitative Impact ... 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