The industry’s Assets Under Management. This suggests some skittishness on the part.
For measuring and monitoring the private pension industry. Pension Markets in Focus provides accurate. Pension Funds and Other Institutional Investors.
European Commission - PRESS RELEASES - Press release. European Commission. MEMOBrussels, 2. 7 March 2. Revision of the Occupational Pension Funds Directive – frequently asked questions. See also IP/1. 4/3. What are occupational pension funds?
Occupational pension funds or Institutions for Occupational Retirement Provision (IORPs) are financial institutions which manage collective retirement schemes for employers, in order to provide retirement benefits to their employees (the scheme members and beneficiaries). Occupational pensions, which include an employer contribution, are known as the . There are some 1. EU. They hold assets worth .
Why did the 2. 00. Occupational Pension Funds Directive need to be revised? The Occupational Pension Funds Directive 2. EC (also known as the IORP Directive) lays down basic requirements for occupational pension funds and their supervision, including rules which oblige occupational pension funds to invest their assets prudently, in the best interest of members and beneficiaries. It aims to provide the conditions under which a single market for occupational pension services could start developing.
However, there have been significant developments since 2. First, the financial crisis has recalled the need for sound governance of financial institutions and clear information to members and beneficiaries. Failure of certain funds in the EU meant in some cases a cut in members' and beneficiaries' rights.
This has shown a need to strengthen governance provisions. This is particularly relevant since there has been a decline of .
Defined benefit pension schemes guarantee pay- outs upon retirement. Contrary to defined benefit schemes, in defined contribution schemes the investment risk is borne by the pension scheme member, with no guaranteed pay- out. Therefore, governance and transparency of information rules are especially important for defined contribution schemes. The growth of defined contribution schemes is illustrated in the figure below. Figure 1: Membership in defined benefit, defined contribution, and hybrid schemes (combining both defined benefit and defined contribution), in millions of members.
Source: Commission Services, Eurostat, OECD and national sources. Second, ageing populations have increased the pensioner- to- worker ratio, and also the need for more retirement savings and for strong occupational pensions systems which are being developed in several Member States. Third, there is an increasing recognition of the need for long- term investment in Europe's economy, and occupational pension funds are among the largest institutional investors in Europe. What are the key aims and contents of this proposal? The proposal has four key objectives and introduces improvements in all these areas to: Ensure the soundness of occupational pensions and better protect pension scheme members and beneficiaries.
The proposal would introduce: (i) new governance requirements on key functions (risk management, internal audit and where relevant actuarial function),(ii) new provisions on remuneration policy, so that institutions have a sound remuneration policy (for instance avoiding conflicts of interest) and regularly disclose relevant information on such policy,(iii) a self- assessment of the risk- management system (through a Risk Evaluation for Pensions),(iv) the requirement to use a depositary (that is an entity in charge of for the safe- keeping and oversight of members and beneficiaries' assets), particularly to reduce operational risk,(v) enhanced powers for supervisors including for chain- outsourcing (outsourcing and all subsequent re- outsourcing) and stress testing. Better inform pension scheme members and beneficiaries. The proposal would introduce a Pension Benefit Statement standardised at EU level that provided pension scheme members with simple and clear information about their individual pension entitlements. The Pension Benefit Statement aims to support informed decision- making about (i) pension adequacy (answering the question .
The Pension Benefit Statement helps individuals maintain a good understanding of their occupational pension entitlements throughout their working lives and across Member States, the latter being particularly important for the increasing workforce that is mobile across the EU (see also Question 1. Question 1. 2 on the Pension Benefit Statement). Remove obstacles for cross- border provision of services so that occupational pension funds and employers can fully reap the benefits of the single market. 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 and for fund assets to be transferred across Member States, notably by introducing a pension fund transfer procedure (see also Question 1. Innovative companies, ranging from SMEs to multinationals, would be able to reduce staff costs through economies of scale, risk diversification and innovation. Encourage occupational pension funds to invest long- term in growth- , environment- and employment- enhancing economic activities.
The proposal would modernise investment rules to allow occupational pension funds to invest in financial assets with a long- term economic profile thereby supporting the financing of growth in the real economy. The proposal would change the existing provisions on investment restrictions to make sure occupational pension funds remained free to invest in infrastructure, unrated loans etc., thus ensuring that investments, in particular with a long- term profile, should not be restricted if the restriction is not justified on prudential grounds. What benefits would arise from this proposal? The proposal would improve financial stability, as certain occupational pension funds are large financial institutions with several millions of members and beneficiaries. Employers, including SMEs, are expected to benefit through the reduced cost of joining an existing occupational pension fund. Moreover, employers joining a pension scheme in an established market can expect to see a reduction in their administration and investment costs.
Multinational companies would also benefit from more easily consolidating their existing pension schemes (possibly in different Member States) into one occupational pension fund. Member States would benefit because well- governed occupational pension funds, and wider geographic coverage, are expected to reduce some of the fiscal pressure on state pension systems. Citizens in general and those who are mobile across borders in the course of their careers in particular would also benefit from having the Pension Benefit Statement in a standardised format, for all the Member States in which they have worked.
More generally, all citizens would benefit from better protection through strengthened rules for governance of occupational pension funds. They would also benefit from improved personalised information so that they could make better- informed decisions about their retirement provision. How would this initiative contribute to long- term investment? The proposal would stimulate the capacity of occupational pension funds to invest in financial assets with a long- term economic profile and thereby support the financing of growth in the real economy in several ways: - The Risk Evaluation for Pensions would allow occupational pension funds to be more aware of their commitments to their beneficiaries and thus make better- informed decisions about investments in long- term assets; - Provisions on investment restrictions would be modernised (as explained above) so that Member States could not restrict investment choices made by occupational pension funds (in particular in assets with a long- term profile such as infrastructure) if restrictions were not justified on prudential grounds. How would it contribute to the agenda for safe and sustainable pensions? In February 2. 01. Commission adopted a White Paper on safe and sustainable pensions.
EU (IP/1. 2/1. 40, MEMO/1. MEMO/1. 4/2. 17). A reform of the 2. Occupational Pension Funds Directive featured prominently among the action points included in that White Paper. This legislative proposal meets that commitment.
Is there any link to the Acquisition and Preservation Directive for pension rights? The proposal for the revision of the Occupational Pension Funds Directive includes the use of the Pension Benefit Statement, a common template for reporting to scheme members and would thus support the effectiveness of the Acquisition and Preservation Directive as scheme members would need to have a clear and concise overview about their pensions rights accumulated in different national occupational pension funds across Member States. The common template would also support the development of an EU- wide pension tracking system. More generally speaking, as defined contribution schemes with investment choices for the member (multi- fund occupational pension funds) are becoming more widespread, the Pension Benefit Statement is expected to provide more relevant information to individuals for taking investment decisions in relation to their particular characteristics, notably their age and risk profile. Where is the added value in EU- level action, given that occupational pension funds are concentrated only in a small number of Member States?
While occupational pension funds play a significant role in the pensions systems of only a minority of Member States, they exist to some extent in most Member States, and even in those Member States where they do not currently exist, employers are free to contract their occupational pension provision with an occupational pension fund in another Member State, if they choose to do so. A more harmonised and robust EU regulatory framework for the supervision of occupational pension funds can therefore pave the way for the development of occupational pension funds in some Member States where they are currently not developed or non- existent.