Pan-European Pension Funds the road lies open

1. Pan-European Pension Funds the road lies open

2. Key messages • IORP Directive has fundamentally changed the face of supplementary workplace pension provision • Potential and innovative nature of the IORP Directive still has be to uncovered - first market developments look promising • EIORPs (pan-European pension funds) become close to a reality – the learning process of going cross-border is speeding up

3. About the EFRP The EFRP • 29 Member Associations • 16 EU Member States(EU-15 – EL) + HU + SK • 5 non-EU(CH, Guernsey, HR, IS, NO) • Core Membership : funded andworkplace pension providers Representative organisation with EU institutions, OECD and IOPS 75 million EU citizens rely on EFRP members for their supplementary retirement income - Total assets managed = 3,6 trillion Euro (2006)

4. About the EFRP EFRP CEEC Forum – new Europe • 10 Members: Bulgaria*, Croatia, Czech Republic, Estonia, Latvia, Lithuania, Hungary, Slovak Republic, Slovenia and Romania * Observer status • Role: • Discussing issues common to Central & Eastern European pension systems • Exchanging views on experiences in pension systems • Debates may result in action points to be taken to EU level in Brussels • Promoting common European values in pension systems

5. Outline • Past Historical overview of the IORP Directive →strategic political choice • Today Current state of the IORP Directive – EFRP survey on implementation → too lengthy, but broadly successful • (near) Future Towards pan-European pension funds → a lot of unused potential still to be uncovered

6. Historical overview of the Directive History of IORP Directive • 12 years from first proposal (1991) to adoption (2003) • 4 years from adoption (2003) to notification of all MS (2007) • → Fundamentally changed the face of European workplace pension provision

7. Current state of the IORP Directive – EFRP survey Implementation - EFRP survey (1) EFRP Survey – 21/11/2007 Responses received from 20 EU MS Implementation process included - 43 months wait - Dialogue and cooperation - Limited gold-plating - EU Commission initiatives

8. Current state of the IORP Directive – EFRP survey Implementation - EFRP survey (2) Strategic targets met - prudent person rule - possibility for IORPs to have cross border activities - strengthened supervisory approach - beneficial policy effects

9. Current state of the IORP Directive – EFRP survey Implementation - EFRP survey (3) • Managing progress • - accommodating diversity • NMS – IORP Dir. is felt incompatible with their recent pension reform introducing: • mandatory private pensions • voluntary private pensions • - balancing regulatory burden • - promoting soft law – clarification of concepts such as full funding, information rules, ring fencing, …

10. Towards pan-European Pension Funds EIORP – EFRP long-standing believer EFRP promoting the advantages of pan-European pension funds: - demographic imbalance requires efficient and affordable pre-funding - single market for – financial –services and labour long overdue - need to enhance competitiveness

11. Towards pan-European Pension Funds EIORP (2003) – EFRP model

12. Towards pan-European Pension Funds EIORP (2007- …. ) – market developments (1) • EFRP (2003) model still seen as the valid model for pan-European pension funds • Multinationals are exploring the potential of the IORP Directive(IBM, Unilever, Philips, etc.) • Mainly asset pooling – too early for “real” liability pooling • Some IORPs are considering to become EIORPs - European pension providers

13. Towards pan-European Pension Funds EIORP (2007- …. ) – market developments (2) • Most cases are confidential or of unclear status • consultants working on feasibility studies • process of going cross-border is seen as strategic (= long term orientation) • focus on a limited number of MS • not yet aiming to streamline benefits plans on a EU-27 basis

14. Towards pan-European Pension Funds EIORP (2007 - …. ) – market developments (3) • Barriers are slowly dismantled • Tax • ECJ decisions are favorable !! • Contributions • Danner (C-136/00), Skandia (C-422/01) • Transfers • Commission v. Belgium (C-522/04) • Pension fund income • dividends and interests – EFRP complaints

15. Towards pan-European Pension Funds EIORP (2007 - …. ) – market developments (4) • Social and Labour law (= MS competence) • CEIOPS working on mapping out S&L in the MS • List exists in all MS but in most cases no English version available or not publicly available • Consistent and correct definitions / interpretation of MS S&L is needed • Important to remember that S&L is MS competence • EU proposal for a “Portability Dir” harmonising occupational pension schemes rules - in breach with the subsidiarity principle - does not facilitate mobility throughout EU because of patchy application

16. Towards pan-European Pension Funds EIORP (2007 - …. ) – market developments (5) • Prime locations identified: • Belgium, Ireland, Luxembourg, Netherlands • Regulatory competition/arbitrage possible ?? • YES → principle based Directive • NO → CEIOPS aiming for supervisory convergence (“harmonisation”) → Pension industry • in favour of “light” form of regulatory competition • no “hard” race to the bottom • core value = AFFORDABLE & ADEQUATE PENSIONS

17. Key messages • IORP Directive has fundamentally changed the face of supplementary workplace pension provision • Potential and innovative nature of the IORP Directive still has be to uncovered - first market developments look promising • EIORPs (pan-European pension funds) become close to a reality – the learning process of going cross-border is speeding up

18. 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