01 December 2014

IPE: Final IORP II draft ahead relaxes depository, prudent person rules

Some in the industry remain concerned that the draft continues to refer to IORPs as financial service providers, omitting wording that previously said they should be regarded as institutions with a “specific social purpose”.

Pension funds could be exempt from appointing a depository under the latest, and final, revision of the IORP Directive before negotiations with the European Parliament get underway.

The fourth compromise draft drawn up during Italy’s presidency of the Council of the EU also sees a streamlining of recommendations for the Pension Benefit Statement (PBS), and relaxes wording on requirements for the management of the funds to be “fit and proper”. First published on 21 November, the draft was on 28 November endorsed as the compromise to be used during negotiations with the European Parliament. The Latvian government will begin negotiations next year, with the aim of passing the revised Directive after its first reading in Parliament.

In the negotiating mandate, the council said four key issues – the PBS, the risk-evaluation for pensions framework, regulating for the use of a depository and refining cross-border requirements – had been addressed. The presidency was therefore confident the draft represented a balanced approach able to obtain the support of a “vast qualified majority”.

The draft upon which negotiations will be based has relaxed requirements for the appointment of a depository, stating that it would be up to individual member states to account for the “nature, scale and complexity” of schemes when deciding whether they will need to appoint anyone.

Industry concerns revolve around the IORPs’ often unique anchoring in social and labour law, with services mandated after agreement with social partners, rather than classing the provision as a financial product on par with that offered by insurers. The draft continues to see the prescription surrounding the PBS reduced, with only two of the initial eight articles on the statement remaining within the Directive.

Full article on IPE (subscription required)

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