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The guidelines highlight the role of regulators and supervisors as ‘gatekeepers’ of private pension systems. Issues include minimum requirements related to the pension entities’ starting capital, funding policy and risk management mechanisms, as well as their governance structure and investment policy. They also outline the circumstances in which a licence to operate may be withdrawn.
The new guidelines agreed between the OECD and IOPS set out minimum requirements that pension entities should meet when applying for a licence to begin operating, and should help pension regulators and supervisors to improve the way private work-related pension entities are managed.
The licensing regime would ensure that pension entities upgrade their governance improvements which would help protecting pension funds in periods of financial turmoil.
“These joint guidelines are a major step forward for furthering international co-ordination among pension regulators and supervisors”, said Ambrogio Rinaldi, Director at COVIP, the Italian pension fund supervisor. “While they are respectful of differences in national approaches to pension fund regulation, they reflect recognition of the need to ensure common, basic standards among pension entities wishing to enter the industry.”
The guidelines will be reviewed in three years during which time the OECD and the IOPS will monitor its implementation.