IORPs play an important role in providing retirement income to workers. Therefore, it is important that IORP II offers a high standard of protection for IORPs’ members and beneficiaries. Currently, the regulatory treatment of IORPs differs significantly across Europe. This means that the resilience of IORPs in different member states also varies. Because both the current directive (IORP I) and the proposal for IORP II do not address these differences, it is important that IORPs’ cross-border activities are fully-funded at all times.
Nicolas Jeanmart, head of personal insurance, general insurance & macroeconomics at Insurance Europe, said: “This will guarantee a high level of protection for members and beneficiaries, even when a foreign IORP — which is subject to the prudential rules of another member state — manages their pension promise. It will also prevent the transfer of risks to other countries and limit the risk of regulatory arbitrage between the different prudential rules applicable to IORPs.”
A longer transitional period should also be granted to markets where the option set out in article 4 has been implemented. This provision allows insurers to manage occupational pension schemes according to IORP rules, provided that they ring-fence their business. Moving to a different framework (Solvency II) is a lengthy, complicated and costly process that needs to be amortised over a long period, i.e. well beyond 2022, as currently envisaged.
Jeanmart added: “Another important point is the information given to prospective and existing members and beneficiaries. Insurance Europe believes that people should be fully aware of the risks they bear, including in the pre-enrolment phase. In particular, all the conditions linked to pension promises (e.g. soft or hard guarantees) should be clearly disclosed, given that IORPs might be allowed to reduce pension benefits in particular cases.”
It is important for information requirements to be principle-based, so that they are able to respect national rules and traditions. In many member states, pension information is already provided through a variety of means, in line with local practices and the design of national pension systems.
The trialogues begin on February 29.
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