IORPs up 46%

The number of cross-border IORPs active in the EEA has risen from 48 to 70 over a time period of 18 months, according to CEIOPS' 2008 Report on Market Developments. Cutoff dates were January 2007 and June 2008, respectively. The bulk of those cross-border plans is still focused on the country pair Ireland - UK, representing 50% of all plans, down from 60% on last count. Most of the activity happened in Austria, Belgium and Luxembourg. Removing the basis effect of plans that have been in operation prior to the implementation of the Pensions Directive, the growth in plan numbers increases to 244%.

While it's good to see some activity picking up, it's still too slow to constitute significant momentum, even if rebased.

CEIOPS State of Pensions Report

CEIOPS' Report on financial conditions and financial stability in the European Insurance and Occupational pension fund sectors has a good section (starting p. 22) about recent developments in the European pension funds market, giving insights into last year's changes in a number of countries and a statistical overview, based on Eurostat.

Failed Pensions Directive?

The Pensions Directive has failed and should be replaced by a new version as quickly as possible, according to a panel discussion reported by IPE last week. The reasoning is that at this point, there are only five new cross border pension schemes in operation.

While I agree that the market response to the new opportunities offered by the Pensions Directive has been slow to date, talk of a "new" pensions directive is counter-productive in my view. The retirement industry has an unusually long time horizon, it is therefore not prone to hasty moves, especially not in the presence of regulatory uncertainty. As the CEIOPS Initial review of key aspects of the implementation of the IORP directive showed in April, there are important aspects that require legislative attention, thus the transposition of the pioneering project that is the Pensions Directive, while formally finished, is not complete. 

The Pensions Directive can be improved, but improvements should be approached in a gradual manner, as it is highly unlikely that IORP II could bring pan-European harmonisation of retirement systems. Hence impediments to cross-border schemes, such as taxation issues, need to be removed one by one. The attractiveness of cross-border schemes should be increased by expanding the scope of the Directive's applicability. Surprisingly, this is not part of CEIOPS' conclusions, but as described earlier, an important segment of several Central & Eastern European countries' mandatory occupational retirement schemes lies outside of the Directive's scope. This unfortunate omission is due to the fact that these countries did have no part in the preparation of the Directive prior to their accession to the EU. 

Pensions Directive Review

As a precursor to the EU Commission review expected later this year, CEIOPS has published its own Initial review of key aspects of the implementation of the IORP directive. The main conclusions (from the press release) are:

there is considerable diversity in the way some key aspects of the IORP Directive have been interpreted and implemented;

there is little evidence of major issues arising from these differences;

given early days and limited experience of the Directive's implementation in some areas, it would be premature to recommend changes to the Directive.

More to follow ...

Mediation mechanism for supervisors

CEIOPS invites comments on its Consultation paper to establish a non-binding mediation mechanism available to supervisory authorities under the directives within the Committee's purview. The mechanism is proposed to work with an accept or explain approach, thus forstering transparency. However, the issue that might be considered to be most in need of mediation (i.e. different funding requirements in Belgium and the Netherlands) appears not to fall within the scope of the mechanism.

Pensions directive to be revised 2008

In its annual report, CEIOPS gives an overview (p. 47f) of its past & current activities. Its Occupational Pensions Committee (OPC) is working on putting together materials for the revision of the Pensions Directive that is scheduled by the Commission for next year. Areas of material legal uncertainty to be clarified are concepts such as fully funded, ring-fencing or the calculation of technical provisions.

39 cross border IORPs

Already in early March, CEIOPS reported the status of cross-border IORPs that were active by the end of January 2007. For some reason, this has escaped our attention to date, which is quite unforgiveable since it is an interesting statistic.

Of the 39 institutions reported, 77% have been in operation prior to the Pensions Directive's entry into legal force. Only 9 are "new" IORPs, located in Finland (1), Germany (1), Ireland (4), Luxemburg (1) and the UK (2). Notably absent from that list are Belgium and Liechtenstein, but we would wager that the "many new cross-border IORPs" anticipated by CEIOPS should change that ranking fairly soon, especially since Belgium is a relatively late arrival in terms of directive transposition. We hope that this statistic is updated periodically, for instance quarterly.

CEIOPS also notes that the Budapest Protocol of supervisory cooperation works well, but that "some features of the IORP Directive might benefit from further clarification".