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2. Key messages . EFRP is the only European industry representative focussing on supplementary private pensionsSupervisors and IORPs share a common goal: deliver secure and affordable pensions To develop and flourish, supplementary private pensions need a stable and supportive regulatory environme
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1. EFRP views on supervision of private pensions
2. 2 Key messages EFRP is the only European industry representative focussing on supplementary private pensions
Supervisors and IORPs share a common goal: deliver secure and affordable pensions
To develop and flourish, supplementary private pensions need a stable and supportive regulatory environment
CEIOPS should embrace occupational pensions as part of its core mission
3. 3 EFRP today
4. 4 EFRP tomorrow ? EFRP is currently reviewing its structure and governance to reflect i.a. EU enlargement
Pension reforms in the EU-10 have introduced mandatory private pensions (2nd pillar) and voluntary private pensions (3rd pillar)
Mismatch with EU-15 pension provision and pillar approach
EFRP wants to contribute to maximising the chances for success of enlargement process in the field of supplementary pensions
5. 5 EFRP guiding principles The EFRP stands for:
respect for diversity
no pension system is inherently superior to another
25 different Member States
25 different pension systems
at least 25 different cultures
the sharing of common goals and objectives
the provision of secure and affordable pensions
focus on private pension provision
6. 6 Supervisors and EFRP – a common goal Supervisors and IORPs share a common goal: ensure the delivery of secure and affordable pensions
Preamble of IOPS principles on private pension supervision
main objectives of pension supervision:
to promote the stability, security and good governance of pension funds and plans
to protect the interest of pension fund members and beneficiaries
to promote a well functioning pension sector
EFRP ? this implies affordability/efficiency criterion
7. 7 Delivering secure and affordable pensions Promoting the development of private (funded) pension systems is high on the EU agenda
Private pension providers can only deliver in a cost-efficient environment
Policy makers should be aware that the law of diminishing returns also applies to regulation & supervisory requirements
To allow pension providers to deliver affordable and secure pensions supervisors have to
find the balance between security and costs (short term ? long term security)
accept that pensions are long term commitments which involve uncertainty and adds complexity
8. 8 Stable and supportive regulatory & supervisory environment (1) In the EU, IORP Directive is the foundation for further development of workplace pensions
sets standards for supervisors across EU
tasks the supervisors working through CEIOPS to actively cooperate to make the Directive work:
single license
common understanding
establishes the home country supervision
liberalises investment practice
EU foundation should be in place since 23 September 2003…
9. 9 Stable and supportive regulatory & supervisory environment (2) By 23 September 2005, Member States should have notified all their national laws implementing the IORP Directive
20 MS notified
2 MS partially notified (FR, UK)
3 MS not-notified (BE, CY, IT)
But now the EU Commission is checking quality of the national laws - has the IORP Dir been transposed correctly?
10. 10 Supervisory cooperation – EU (1) At EU level, ‘Lamfalussy system’ for financial services coordinates MS regulatory & supervisory activity
Aim:
create and enforce a consistent EU-wide financial services framework
be able to adapt framework quickly
11. 11 Supervisory cooperation – EU (2) “Lamfalussy” for insurance and occupational pensions:
EU Parliament + Council as main legislators (“Level 1”)
EIOPC – forum of national law/rule makers (“Level 2”)
CEIOPS – forum of national supervisors (“Level 3”)
Enforcers e.g. EU Commission (“Level 4”)
12. 12 Supervisory cooperation – EU (3) Lamfalussy + IORP Directive mean CEIOPS must:
ensure information exchange between supervisors
develop common understanding of IORP Directive
display mutual trust in work and procedures of colleagues cross border
Commissioner Ch. Mc CREEVY on 15 sept. in Warsaw
pro-active supervisory cooperation in CEIOPS is the key to success of the new EU regulatory framework for IORPs
13. 13 Supervisory forum – IOPS At international level – IOPS (as from July 2004)
IOPS Principles of Private Pension Supervision:
broadly in line with current supervisory practices in the EU
neglect implications of certain governance structures of pension funds (paritarian, corporate sponsors, non profit)
principles should be universally applicable despite diversity in the private pension systems
14. 14 IOPS Principles (1) P1 – Objectives
clear and specific mandate for supervisors is missing in several EU MS
P2 – Independence
essential to be independent of political authorities / pressure – (political opinions mostly based on short term considerations)
P3 – Adequate resources
couldn’t agree more
P4 – Adequate powers
in favour of strong powers but used with discretion and proportion
15. 15 IOPS Principles (2) P5 – Risk orientation
not yet common practice to allocate resources with targets
pro-active role may not end up with inadequate reporting standards
P6 – Proportionality and consistency
proportionality to the risk being mitigated: good approach but not adopted in practice
P7 – Consultation and cooperation
supervisors “should be allowed to consult” ? outdated
open consultation process improves quality of legislation
cross-border supervisory cooperation an obligation under the IORP Dir.
P8 – Confidentiality
obvious
16. 16 IOPS Principles (3) P9 – Transparency
audit and reporting requirements for supervisors not yet common practice ? improvement but still way to go
very important:
industry and supervisors understand each other
soft law has hard consequences
improves efficiency (no long term trade off between transparency and efficiency)
supervisory rules and procedures should be explained and published ? insight in how decisions are taken
P10 – Governance code
weakest point of principles
not yet the standard in the EU
17. 17 Extension of Solvency II to IORPs ? April 2006: EIOPC postpones issue of Solvency II and IORPs to 2008
Impact of IORP Directive on regulatory framework, providers and solvency-relevant factors still unknown
Some distinctive features:
Possibility of increasing IORP contribution rate
Role of the sponsor
Long term investment horizon
Compulsory participation
Flexibility in benefit – conditionality of indexation
Changing the pension deal
Differences between IORPs and life insurance mean IORPs will need a separate solvency review – no ‘cut and paste’!
18. 18 Key messages EFRP is the only European industry representative focussing on supplementary private pensions
Supervisors and IORPs share a common goal: deliver secure and affordable pensions
To develop and flourish, supplementary private pensions need a stable and supportive regulatory environment
CEIOPS should embrace occupational pensions as part of its core mission
19. 19 Contact EFRP
Koningsstraat 97 rue Royale
1000 Brussels
Belgium
Tel.: +32 2 289 14 14
Fax: +32 2 289 14 15
efrp@efrp.org
www.efrp.org