The latest draft of the revised IORP Directive was published on 27th March by the European Commission. The revised directive is aimed to achieve better governance of occupational pension schemes (Defined Benefit, Defined Contributions…Defined Ambition in the future), more informed communication with scheme members, remove obstacles for cross-border provision of services across EU and encourage schemes to invest in long term assets which support the growth of the real economy.
Here is the link to the revised directive: http://ec.europa.eu/internal_market/pensions/directive/index_en.htm
And for anyone looking for a shorter, easier version, NAPF have produced a 20 page tabular clause-by-clause summary of the key changes:
Since the proposals are in a draft stage at the directive level and there has been no guidance so far on how they will be implemented by the UK regulator, the direct implications are not fully clear for pension schemes. It does, however, underline the importance of a Pensions Risk Management Framework which provides a governance check and robust risk management tool for Trustees:
The emphasis on changes in governance and communication especially highlights the need for Trustees to adopt a clear, agreed and written down game plan for achieving funding targets and managing investment risk against which the scheme’s progress can be monitored. This can be achieved in a simple one page format (shown above) and can serve as a check on governance and a track record of “why” and “when” decisions were taken by Trustees with respect to the investment strategy of the pension scheme. A logical game plan with the right focus and information can also help scheme members to understand where and how the scheme is progressing.
Needless to say, the revised directive adds further uncertainty and complexity to the management of pension schemes. And while the directive is finalised and rules implemented, the way forward for pension schemes is to review and where possible, add clarity
in their management process.
Please note that all opinions expressed in this blog are the author’s own and do not constitute financial legal or investment advice. Click here for full disclaimer.