26 March 2012

EFRP submission to the Work and Pensions Committee on EU Pensions Policy

The European Federation for Retirement Provision (EFRP) is committed to promoting cost efficient, adequate and sustainable workplace pension schemes across Europe. The EFRP supports most of the initiatives proposed in the White Paper, but is very concerned about the revision of the IORP Directive.

In the White Paper, the European Commission acknowledges the importance of supplementary pension schemes. Yet, in its call for Advice to the European Insurance and Occupational Pensions Authority (EIOPA), which preceded the revision process of the IORP Directive, the European Commission proposes harmonised capital requirements for work-based pension funds, with a strong focus on a high level of short-term security. This proposal could significantly harm the supply of future occupational pensions. Therefore, the EFRP has invited the European Commission to align the IORP revision and the White Paper on Pensions, and to re-think the entire revision process with a view to pursuing the security of pensions from a “holistic” or all-encompassing approach, focusing on with adequacy and sustainability.

Workplace pension provision will become more and more important in Europe. This is acknowledged by the European Commission’s White Paper. The revised IORP Directive is an important tool to facilitate, to regulate and to stimulate adequate, sustainable and secure workplace pension provision across Europe. The revision will be even more significant since the Directive should be adapted to fit DC schemes whose number is growing sharply. As pointed out earlier, the proposals to introduce harmonised capital requirements for IORPs are undesirable, harmful and might hamper the supply of future pension provision. The EFRP believes that a revised IORP Directive should facilitate the different kinds of workplace pensions currently in existence rather than threaten it. With respect to quantitative requirements, the IORP Directive should therefore prescribe overarching principles.

The EFRP is willing to cooperate with European institutions in developing quantitative standards which testify to the security of workplace pension schemes. However, these standards should be developed by taking the IORP Directive as a starting point rather than the Solvency II logic. EU-wide principles, in the framework of a revised IORP Directive, may guarantee the security of workplace pension provision only if they take into account the uniqueness and diversity of IORPs: their structure and the peculiar characteristics of their activity. Therefore, any reference to similar but not comparable legal instruments should be put aside in the revision process. This process should be entirely framed in the IORP Directive: it should aim to make workplace pensions stronger, by making them more secure, rather than to pursue theoretical “level playing fields” between diverse providers, which do not compete in reality.

The EFRP supports the recognition by EIOPA of the importance of the qualitative impact assessments after each chapter in the Call for Advice. The consequences in terms of costs and benefits for the IORP members, IORPs (including sponsors) and supervisory authorities are seen as relevant and should be defined in sufficient detail.

Moreover, the EIOPA highlights the need for a deeper impact assessment through the Quantitative Impact Study (QIS). The EFRP strongly supports EIOPA position and stresses that the QIS should also take into account the micro- and macro-economic consequences of introducing harmonised capital requirements and valuation methods. It should be done in parallel with the European Commission’s impact assessment.

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