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The pan-European pension goal was already alive in the 1990s, and the IORP Directive accepted the European Federation for Retirement Provision's 2000 proposal for a European IORP that would pool assets in a single vehicle while beneficiaries' entitlements remain subject to national social and labour laws.
Now the original aim of the IORP Directive has been equalled by the Commission's desire to maintain consistency in financial services legislation to avoid regulatory arbitrage. The idea is that all EU Member States should enact an economic risk-based approach to pension supervision.
This is inadvisable for several reasons. First, an "economic risk-based approach" is code for one based on Solvency II to a greater or lesser extent. Solvency II itself is based on Basel risk-capital requirements for banks. The flaw is that these require notions of 97.5 per cent or 99 per cent certainty of capital ratios – themselves based on backward-looking investment return assumptions. In practice, these promote herd behaviour and might discourage prudent long-term investment behaviour.
Second, the Commission accepts the inherent differences between insurance companies and pension funds with a company as sponsor, so it should accept the need for a 'different systems, different standards' approach.
The revised IORP Directive should focus on promoting cross-border activity and harmonising defined contribution pensions – particularly since the latter are likely to provide the main source of growth for the former. This would align a revised Directive with some of the main principles that informed the first.