The Cut – How today's IORP II revision affects your scheme

In today's announcement the internal market and services commissioner Michel Barnier said the legislative proposals will improve governance and transparency of European funds and "improving financial stability as well as promoting cross-border activity" to further develop occupational pension funds as "key long-term investors".

The revised directive which will come into effect in 2017 will increase the governance requirements on schemes:

Source: European Commission

In the risk evaluation, schemes will have to include those associated with "climate change, resource use and the environment".

Schemes will also have to provide members with EU standardised benefit statements. These statements should aim to answer the following questions for members: 'Do I need to save more to maintain my standard of living after retirement?' and 'Is my investment approach right?'

The commission has estimated the administrative burden of the directive will result in a one-off adjustment cost of €22 (£18.20) per member, and a yearly cost of between €0.27 and €0.80 per member.

The directive encourages schemes to invest in assets that benefit long-term growth, environment and employment-enhancing economic activities. 

Source: European Commission, new directive

Pensions Expert has previously reported an increased interest in infrastructure investments by European schemes. Data from our sister title MandateWire, found increased interest in alternative assets, with infrastructure a central feature, last year.

The proposed changes will make it easier for cross-border transfers.

"The proposal would make it easier for occupational pension funds to operate a pension scheme that is subject to the social and labour law of another member state," the commission stated.

However, the much-maligned requirement for cross-border schemes to be fully funded has not been removed.

Source: European Commission

Trade bodies immediately welcomed the absence of any fresh solvency capital requirements for European pension funds, which were dropped in May last year following concerns over their impact on the viability of providing pensions. 

Chair of the continent's pensions watchdog PensionsEurope, Joanne Segars, who is also chief executive of the UK's National Association of Pension Funds, issued a press statement saying the cost of such requirements would have made it "difficult for sponsoring companies to provide workplace pensions".

The statement continued: “PensionsEurope’s position is that IORPs are social institutions operating on [sic] financial markets, protected and regulated by national social and labour law."

The NAPF's EU and international policy lead James Walsh tweeted a 10-point summary of the major changes:

My 10-point summary of new IORP Directive, plus links to the full text:http://t.co/Gmqk1Xygow #napf

— James Walsh (@jwalshNAPF) March 27, 2014