IORP II, the European Union’s sweeping reform of pension fund legislation, came into force on 13 January. It added 43 new articles to the original IORP directive and put a renewed focus on governance and communication standards.
Institutions for occupational retirement provision (IORPs) must invest according to prudent person principles, improve their internal risk management functions, and make more data and information available to members.
The European Commission said this month that it would “carefully examine” how each member state has implemented the directive “to make sure that they fully deliver the new standards set at the EU level”.
The legislation has had a fraught conception. European regulators and lawmakers initially wanted to introduce a “holistic balance sheet”, which would have introduced a solvency framework for pension schemes across the EU. This was successfully fought off by member states including the Netherlands, the UK and Germany and never made it into 2017’s final text.
However, the EU’s sustainable finance initiative last year rekindled fears that lawmakers would try to harmonise rules across the bloc to the detriment of pension funds. The European Commission attempted to introduce so-called “delegated acts” legislation that would have given the EU more power to enforce new rules on the pension fund sector.
The European Parliament, made up of elected MEPs, has supported the idea, but the EU Council, representing national governments, has not. At the time of writing, the final text was yet to be agreed.
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