Council moves ahead on updating the EU workplace pensions framework 10:00 The Council today agreed its negotiating position on the review of the EU’s framework for occupational[...]

The Council today agreed its negotiating position on a review of the EU's framework for occupational pension funds, also known as institutions for occupational retirement provision (IORPs).

The IORP II directive governs the activities and supervision of such entities. Its review aims to enhance transparency of costs and returns for users, reinforce risk management in the area, and remove barriers, including cross-border barriers, currently hindering efficient investment in this area.

Strengthening the IORP framework is a key deliverable of both the savings and investments union (SIU) agenda and the EU's One Europe, One Market roadmap. It will also help to boost retirement income for citizens by fostering occupational pension provision at a time when EU demographic and labour market trends are challenging pension adequacy and sustainability of pension systems.

Key features of the Council's position

The Council preserves several core elements of the Commission's initial proposal designed to upgrade the occupational pension framework, boost their cross-border activities and improve collaboration and information exchange among Member States' competent authorities.

It also retains the introduction of the 'prudent person principle', which ensures investments are made in accordance with appropriate risk levels, provisions related to multi-sponsor IORPs and multi-schemes operations, the proposed harmonised framework for collective domestic and cross-border transfers and the foundational business conduct rules proposed by the Commission.

In line with its minimum harmonisation character and the strong call from member states to respect the specificities of national pension systems, the Council's position preserves significant national discretion. In this context and to enhance flexibility, the Council made several targeted adjustments to the initial proposal.

On scope, the Council allows member states to apply the directive to the IORP itself, the authorised entity operating it, or both, subject to legal separation of assets. At the same time, authorised entities established in another member state cannot be prevented from operating IORPs where national law permits. The text also establishes rules on such IORPs' supervision, as well as regarding responsibilities and cooperation between competent authorities.

To support investment in the real economy, the threshold for investing in shares and corporate bonds on regulated markets is raised to 100%, with member states remaining free to enforce more restrictive limits. The Council also introduces amendments to ensure proportionality in the areas of governance and supervision.

Finally, in line with the overarching goal of reducing regulatory burdens and fostering simplification, the Council streamlines administrative procedures and disclosures. In this vein, provisions related to the transmission of information to pension tracking systems, assigning certain tasks to EU-level supervisory bodies and the introduction of supervisory dialogues between IORPs and authorities have been removed from the proposal.

Next steps

The negotiating position approved today is the Council's mandate to start talks with the European Parliament on the changes to the IORP II directive, once the Parliament has agreed its respective position on the review.

Background

IORPs play an essential role in providing adequate and sustainable pensions, reducing pension gaps and preventing old-age poverty. In addition, as long-term institutional investors with almost €3 trillion in assets, IORPs are an important source of capital for the European economy to finance inclusive and sustainable growth. The IORP II Directive aims at ensuring that occupational pensions are sound and pension scheme members and beneficiaries are well protected.

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