The IORP directive - where are we now

16 November 2012

We highlighted in an earlier briefing that changes to European legislation were being considered.

We had hoped that the process would go back to the original business liberalisation agenda many hoped that the original IORP Directive (Directive 2003/41/EC) would deliver.  This would have enabled employers to establish cross border pension schemes or streamline existing ones so that costs could be brought down and pension provision encouraged. Unfortunately the European Commission has chosen instead to propose a revision of the IORP Directive which seeks to impose on funded pension schemes a regulatory regime based on that applicable to insurance companies-Solvency II. The result is likely to have a material impact on the governance and funding of both defined benefit and defined contribution schemes, and an additional round of compliance costs as well. For funded schemes and their sponsors in particular the consequences could be very serious indeed. They could face higher funding costs, changes in their investment policy and less flexibility.