31 July 2011

EIOPA published a report on pre-enrolment information to pension plan members

Among the conclusions, the report states that requirements and practices concerning information before or at enrolment of pension plans differ substantially across European countries and between kinds of pension plans.

Two general objective factors contribute to this result: the absence of a general EU regulation of pre-enrolment requirements for pension plans, and the structural differences between pension plans.

Each of the two factors deserves a detailed assessment. First, one must consider that the IORP Directive covers only a subset of the plans that exist across Europe. Leaving aside occupational plans that do not qualify as IORPs (such as book reserves schemes), personal pension plans currently are under a variety of EU regulations (UCITs, LAD, CRD, MiFID) or, often, only under national regulations. Moreover, the IORP Directive does not make a clear distinction between information that should be delivered at or before enrolment and information to be made available ongoing.

Second, the structural differences in information requirements observed for different kinds of pension plans appear linked primarily to the range of choices that are available to members in the enrolment phase. For occupational DB plans, and for occupational DC plans that do not offer investment choice to individual members, there is little emphasis on specific information to be delivered at or before enrolment.

Conversely, pre-enrolment information has a specific and important role in DC pension plans where different investment options are available to individual members. This applies both to occupational and personal pensions, and usually includes information on different portfolio allocations, risk exposures, and costs that characterise the available investment options. This is in line with Article 11, para 4(c) of the IORP Directive. Past performance of different investment options is also a required information in several jurisdictions, although with the caveat that it may not be indicative of future performance. In some cases, projections are produced of the future development of personal balances and of the benefits that may be reasonably received at retirement, based on standardised assumptions on contributions and expected returns, with the latter that may be higher or lower as a function of the equity share of the portfolio.

In cases where members are offered choice not only between different investment options, but also between different pension providers (as is typical for personal plans), pre-contractual information requirements play a particularly important role. Easiness of comparison is key, and therefore information is usually to be given using standardised formats and sometimes also using standardised methodology for the calculation of cost indicators. Often, the sectoral regulation for UCITs or for life insurance products is applied, as the relevant pension products formally fall in the scope of the EU regulation for these products.

Full report

© EIOPA