IORP II: The new European pension fund directive

On 23 December 2016, the long-awaited “IORP II” directive was published in the Official Journal of the European Union.

This directive is the successor of the IORP I directive 2003/41/EG, which dates from 3 June 2003 and describes the activities and supervision of institutions for occupational retirement provision (IORPs or pension funds).

Save the date: on Friday 3 February 2017 we will organise a lunch seminar to inform you about the novelties and possible implications of the IORP II directive. You will receive an invitation for this seminar in due course.

The IORP II directive (EU) 2016/2341 of the European Parliament and the Council on the activities and supervision of institutions for occupational retirement provision contains, just like IORP I, a number of common standards which should be implemented in national law. Compared with the previous directive, particular attention is paid to:

• a better protection of the rights of the plan members and their beneficiaries;
• a better provision of information towards the plan members and their beneficiaries;
• the facilitation of the mobility of employees between Member States and the cross-border activities of IORPs.

In concrete terms, the directive contains among others, new governance requirements which address the remuneration policy, the management and key functions of the IORP, as well as its risk management.

Risk management is introduced as a key function in an IORP, in addition to the internal audit function and the actuarial function. From now on, IORPs should, for example, carry out their own risk assessment. Furthermore, the directive contains enhanced competences for supervisors in the context of their prudential supervision: particular attention is paid to the exchange of information between the competent authorities, especially in light of the cross-border activities of IORPs and the expansion of the information requirements towards the plan members and their beneficiaries.

Moreover, the directive contains new provisions regarding the investment policy in order to facilitate the cross-border activities of IORPs.

No quantitative capital requirements – such as in the Solvency II directive – have been imposed because it was considered unrealistic in practical terms and ineffective in terms of costs to govern this for pension funds at EU level.

The directive enters into force on 13 January 2017, but is only applicable as from 13 January 2019. Member States have until then to transpose this directive into domestic legislation. It remains to be seen how Belgium will conduct this transposition. In any case, the directive requires certain modifications to the Belgian law on IORPs of 27 October 2006.

> Action point

On 3 February 2017, our pension team will hold a client seminar on the IORP II directive to update you on the novelties and possible implications in Belgium. You will receive an invitation for this seminar in due course.