Brussels, 23 May 2013
Occupational Pension Funds (IORP): Next steps
Summary: Commissioner Barnier has indicated his intention to come forward with a proposal for a Directive to improve the governance and transparency of occupational pension funds in the autumn of 2013. At this stage, and as long as more comprehensive data is needed and Solvency 2 is not in force, the proposal for a Directive will not cover the issue of the solvency of pension funds. In light of the differing situations in Member States regarding retirement products and pension funds, it is necessary to continue technical work on the issue of solvency.
Statement by Internal Market and Services Commissioner Michel Barnier:
European society is ageing. Pension systems must adapt. It is not a simple matter. All Member States of the European Union are affected.
The Commission’s White Paper on Pensions of 2011 suggested several approaches for dealing with an ageing society tackling comprehensively the three elements of retirement systems which exist in Europe, known as the 3 pillars:
1) Basic state pensions which are part of national social security systems (an exclusive competence of Member States);
2) Occupational or company pensions (managed by pension funds, insurance companies or other systems, financed or co-financed by employers, who choose the fund manager);
3) Personal pension products which are non-compulsory and aimed at individuals.
Occupational pension funds are of growing importance in Europe, without being the only element of the second pension pillar, occupational pensions. For example, in some countries (France and Sweden for example) insurance companies are also active in occupational pensions, and other systems also exist
Occupational pension funds have enormous potential: they are part of the solution for meeting the challenge of an ageing society and they are essential for long-term investment and thus European growth.
The existing European Directive on occupational pension funds dates back to 2003. It aims to create a single market for occupational pension funds and to improve their functioning. However, those objectives have only been very partially achieved.
There are three areas where improvements can be envisaged: solvency, governance and transparency.
The need for further technical information before making any decisions on solvency of pension funds should not prevent us from acting now to improve governance and transparency. This is urgent. The diversity of national practices, and the gaps in certain Member States, hinder the development of a genuine internal market for occupational pensions, and harm the protection of future pensioners.
Bearing in mind all these considerations, I have decided first of all to present a legislative proposal focussing on governance, transparency and reporting requirements for occupational pension funds. On those aspects there is broad consensus, at least on the principles.
This proposal will not cover the issue of solvency rules for pension funds, which will for the time being remain an open issue. In my view, the situation should be re-examined once we have more complete data. I emphasise that with regard to solvency rules, we must not lose sight of the need to guarantee in the longer term a level playing field between different providers of occupational pensions.
Nevertheless, I already call on countries which have undercapitalised pension funds to take the necessary measures without delay, and I welcome the initiatives already taken in some Member States to achieve this.
As I have often said, my priority is to protect future pensioners. We must face up to the weaknesses in some occupational pension funds. However, I have no desire to penalise national systems which work well. And I especially do not want, in the current fragile economic situation, to harm the ability of pension funds to play their role as long-term investors.
I intend to present the proposal to improve the governance and transparency of occupational pension funds in the autumn.