Europe

Pensions have risen rapidly up the EU agenda over the past few months.

• The EC is reviewing the main EU Directive on pensions.
• The European Commission is drawing up a pensions White Paper, expected early in 2012, that will build on a Green Paper published in July 2010.

The NAPF engages closely with policy-makers in the European Commission, European Parliament and European Insurance and Occupational pensions Authority (EIOPA) to ensure our members’ views are heard in Brussels and Frankfurt.

Review of Pensions Directive

The European Commission has embarked on a review of the main EU pensions legislation – the Directive on Institutions for Occupational Retirement Provision or ‘IORP Directive’. The Commissioner in charge of this project, Internal Market Commissioner Michel Barnier, has indicated that he is looking to use the insurance industry’s Solvency II regime as a starting point for this work.

Many pensions stakeholders, including the NAPF, have pointed out that there are many important differences between insurance and pensions, not least that pensions are paid over the long term in a relatively predictable manner. Regulations designed for insurers would not be appropriate for pensions.

The EU-level pensions regulator, EIOPA, is currently compiling a weighty response to a formal ‘call for advice’ from the European Commission on how the new Directive should be drafted. EIOPA is expected to deliver this advice by 15th February. We can then expect the European Commission to publish a draft of the new IORP Directive later in 2012.

EIOPA has recently consulted on a draft version of its advice to the EC, and the NAPF has responded to this 517-page, 96-question consultation. The key proposal is for a new pension scheme funding regime based on a ‘holistic balance sheet’. The NAPF:

• challenges the case for a new Directive;
• shows how the ‘holistic balance sheet’ would generate a major increase in pension scheme funding requirements that would force more scheme closures and damage pension provision; and
• highlights the negative impact the proposals would have on the wider economy.

Pensions White Paper

The European Commission will shortly publish a pensions White Paper that will build on the Green Paper, Towards adequate, sustainable and safe pensions systems, that was released in July 2010.

The White Paper is expected to cover a wide range of issues, from increasing longevity to working longer to the portability of pensions across the EU.

In its response to the Green Paper, the NAPF argued that the EU should focus on the 60 per cent of EU citizens who currently have no workplace-based pension, rather than impose new and costly rules on existing pension schemes.

European Market Infrastructure Regulation (EMIR)

The European Council of Economic and Finance Ministers (ECOFIN) has reached agreement on the proposed Regulation, which will form the basis for discussions with European Parliament and the European Commission.  Importantly for pension funds, the Council of Ministers agreed that they will be exempt from an obligation to clear OTC derivative positions through a Central Counterparty (CCP) Clearing House for a period of three years, extendable (on the basis of a review) for a further two years.  Joanne Segars, the NAPF’s Chief Executive, had previously written to George Osborne, Chancellor of the Exchequer, to reiterate the importance that the NAPF attached to the Government sticking to its position on the exemption.  The NAPF will continue to press for a process of rolling reviews and exemptions until pension schemes’ concerns about costs and the safety of their assets have been resolved.

Other EU issues of concern to the NAPF are:

• Alternative Investment Fund Managers’ Directive (AIFMD). This legislation is intended to increase the oversight of hedge fund and private equity managers. We are concerned that the Directive could have unintended consequences that could put up barriers to investing in such funds and increase pension schemes’ costs.
• Corporate Governance Green Paper. We have expressed concern at the Commission’s tendency towards a legislative approach. Instead we have supported efforts to encourage shareholder engagement and would welcome the introduction of high level standards (of a similar nature to the UK Stewardship Code) which could be adopted on a ‘comply or explain’ basis.

The NAPF actively lobbies in Brussels, both directly and though the European Federation for Retirement Provision (EFRP). Established in 1981, the EFRP comprises 28 member associations from across 16 EU Member States and 5 other European countries.

You will find a link to the EFRP and other EU institutions on the right hand menu.

For more information contact james.walsh@napf.co.uk