The Institutions for Occupational Retirement Provisions (IORPs)
have evolved since the publication, in 2003, of Directive
2003/41/EC on their activities and supervision (the "IORP
Directive"). Aiming to align the IORPs framework with the
pensioners and investors' current needs, a final compromise was
reached between the Council of the European Union and the European
Parliament to review the text. Directive 2016/2341 on IORPS (IORP
II) was published in the Official Journal of the European Union on
23 December 2016, and Member States must transpose it by 13 January
Main goals of IORP II
The minimum harmonisation foreseen under IORP II Directive is
enhance proper governance and transparency, establishing
information obligations in relation to pensioners and publicly
disclosed corporate documents and policies
develop the regulatory framework on the conditions of operation
of the IORPs, in the Member States and at European Union level
set up the regime on IORP II for the cross-border
How does IORP II affect you?
The conditions governing activities: IORPs shall have in place
an effective system of governance, complying with the requirements
for a fit and proper management and the regime for the persons
carrying out key functions. The IORP II Directive also imposes
obligations in terms of remuneration and self-assessed risk
Transparency: The IORP II Directive foresees the publication of
the Pension Benefit Statement, a standardised document to be sent
to pensioners annually, providing simple and clear information
about their pension entitlements. Documents concerning governance
and the remuneration policy shall also be disclosed.
IORPs cross-border transfers: new procedures are in place to
transfer IORPs and strengthen the cooperation between the
supervision authorities of the Member States. In the event of
cross-border activity, the technical provisions shall always be
fully funded at all times for the total range of pension schemes
Investment rules: Investment rules have been modernised in order
to allow investments to foster the EU growth, considering as well
responsible investments (environmental effects, for example).
Capital requirements will not change and solvency rules are kept
from IORP I.
What are the next steps?
Member States have now two years to transpose this Directive
into national law. Stricter rules may be imposed by national
legislators, although there are no implementing or regulatory
technical standards foreseen for the IORP II at the European level.
This absence of complementary regulation reinforces the minimal
harmonisation approach aimed at by the European Union in relation
What should you do?
Assess any gaps in the risk management and governance systems,
and perform a risk evaluation of the internal policies at least
every three years or without delay following any significant change
in the risk profile of the IORP.
Check the compliance of the remuneration policy (and amend if
necessary) and adapt the information provided to IORP
Bear in mind that IORPs can outsource their investment
management from other Member States providers, which may have an
impact on your servicing policies.
Consider that the relevant supervisors hold the power to impose
administrative penalties, and to carry out on-site inspections,
stress-testing and specific supervisory review processes.
1. Zoom in on governance
This new governance framework requires the managers and
persons in charge of the key functions to have the appropriate
qualifications, knowledge and experience. These persons (and also
IORP service providers) are also subject to a sound remuneration
policy, which normally must be disclosed, and which is in line with
the interest of pensioners, the risk profile and the objectives of
Key functions (risk management, internal audit, compliance
and actuarial if applicable) shall have their own written policies,
which shall be reviewed each three years and approved by the
management body. A single person or organisational unit may be
allowed to perform one or more key functions, except for the
internal audit function, which shall be independent.
A self-risk-assessment shall be carried out every three
years minimum and to this effect the IORP II Directive foresees, as
does IORP, the following documents:
annual accounts and annual reports
statement of the investment policy principles
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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