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After more than a year of negotiations between the European institutions, the European Commission has also dropped proposals for delegated acts on the proposed Pension Benefit Statement, while the risk evaluation for pensions (REP) is to be replaced by an own-risk assessment – details of which will be decided by national regulators.
The draft of the revised IORP (Institutions for Occupational Retirement Provision) Directive – dated 20 June – is understood to be the finalised text, expected to be unveiled by the Commission on Monday (27 June) after protracted negotiations between the Commission, European Parliament and EU member states.
No further comments or drafting suggestions are being allowed on the compromise text, according to a note sent by the Dutch presidency to those with access to the text.
In possibly the biggest single victory for the industry, the compromise agreement acknowledges the possibility of cross-border IORPs being underfunded, although the overarching requirement is still that they be fully funded at all times.
If this condition is not met, according to the text, the home member state’s regulator must “promptly” intervene and require the IORP to develop and implement measures “without delay” to protect beneficiaries and members.
A formal announcement is understood to have been held back due to the UK referendum on its membership of the European Union, which has resulted in a vote to leave.
The European Insurance and Occupational Pensions Authority (EIOPA) has also been given a non-binding role as mediator, should a home member state’s regulator object to a move to another country.
The responsible investment community also won a significant victory, and sees mention of stranded-asset risk included within the own-risk assessment, strengthening the references to environmental risks initially included in the Commission’s first draft.
Instead, pension funds will now be expected to consider the risk of climate change, environmental and social risks and risks related to the depreciation of assets due to regulatory change – a direct reference to the impact of a carbon price on resources yet to be exploited by oil, gas and coal companies.