Transcript CONSTRUCTIVE FEDERATION OPERATIVES PENSION SCHEME

Pan-European Pensions
ESTABLISHING IORPs
ANNE MAHER
Chief Executive
The Pensions Board
Ireland
London
5 October 2005
AGENDA
What is an IORP?
Where will they locate?
Next steps
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IORPs
Directive definition of IORPs
(a) ‘institution for occupational retirement provision’, or
‘institution’, means an institution, irrespective of its legal
form, operating on a funded basis, established
separately from any sponsoring undertaking or trade for
the purpose of providing retirement benefits in the
context of an occupational activity on the basis of an
agreement or a contract agreed:
individually or collectively between the employer(s)
and the employee(s) or their respective
representatives, or
with self-employed persons, in compliance with the
legislation of the home and host Member States,
and which carries out activities directly arising
therefrom.
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IORPs
Key Elements
Operating on funded basis
Established separately
Sponsoring undertaking
Legal persons, public bodies and natural persons
Acting “as an employer or in a self-employed
capacity”
Context is of benefits relating to retirement from
employment or self-employment
Limited to activities referred to in Directive
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IORPs
Member States specify what are IORPs under
domestic legislation
Defined in Directive as much by what they are
not as what they are
Aims to accommodate different national
systems
Includes institutions with or without legal
personality
Member States can decide whether an entity is
in or out of the Directive (subject to review by
European Court of Justice)
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IORPs
Excludes
Social Security schemes
Financial institutions covered by other Directives:
Insurance undertakings (but Member States may
choose to apply IORPs Directive to pension
business of insurance undertakings)
UCITs
Investment firms
Credit institutions
Pay-as-you-go pension schemes
“Support Funds” (Unterstützungskassen in Germany)
where scheme members have no legal rights to
benefits
Book Reserve schemes (as in Germany,
Austria,
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Sweden)
IORPs
Small Pension Institutions and Statutory Schemes
Member States may choose not to apply
Directive in whole or in part to schemes with
less than 100 members
Small schemes have right to apply Directive on
voluntary basis
Member States can exclude application of
Articles 9 -17 to IORPs where retirement
provision is made under statute – guaranteed
by a public body
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IORPs
Requirements
Limit activity
Separate legal entity
Meet various conditions on operation, governance
and member information
Subject to competent authorities
Meet technical provisions and funding requirements
Comply with investment requirements
Allow appointment of managers and custodians in
other Member States
Allow cross-border activity
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LOCATION
Member States must allow:
Undertakings in their territories to sponsor IORPs
located in other Member States
IORPs in their territories to accept sponsorship
from undertakings located in other Member States
which is ‘cross-border’ activity
Single employer/single country scheme might
consider re-location
Multinational employer might consider:
Pooling investments
Pooling services
Merging schemes in one location
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LOCATION
Regulatory conditions needed for Cross-Border
Recognition by home country supervisor
Special conditions:
Authorisation in home country
Fully funded at all times
Prudential rules: home country of IORP
Social and labour laws: host country of beneficiaries
Host state may prescribe additional investment
constraints
Host state may require information requirements as
imposed on local schemes in that state
In practice may require ring fencing
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LOCATION
Reasons to relocate
Single employer/single country scheme
Regulatory/supervisory regime?
Multinational employer
Better governance/control
Single governance regime
Economies of scale/cost savings
Corporate change/culture
Accommodate mobile employees
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LOCATION
Influences on choice
Tax arrangements
Pension tradition/services available
Availability of tried and tested pension
skills/resources
Regulatory/compliance regime
Ability to accommodate countries outside EU
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LOCATION
Possible Member State Competition
Benefits to being location of choice
Ireland and Luxembourg being mentioned
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LOCATION
Possible changes for pension industry
Consolidation of investment services
Asset management
Fund Administration
Custody
Consolidation of pension services
Actuarial
Legal
Benefit consulting
Benefit administration
Accounting
Compliance
Increased EU-wide competition and pressure on
charges
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NEXT STEPS
Clarification of some Directive requirements
Finalisation of Protocol between Member
State pension supervisors
Consideration and decision on location by
pension scheme sponsors and those
managing schemes
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IN CONCLUSION
Pensions Directive
Is a first step
Likely to be catalyst
Pan-European Pension Funds
Will take time
But WILL come about
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