8 Financial services: occupational pension
funds
| Committee's assessment
| Legally and politically important |
| Committee's decision | Not cleared from scrutiny; further information requested
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| Document details | Draft Directive to consolidate and amend legislation on the activities and supervision of institutions for occupational retirement provision
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| Legal base | Articles 53, 62 and 114(1) TFEU; co-decision; QMV
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| Department
Document numbers
| HM Treasury
(35944), 8633/14 + ADDs 1-5, COM(14) 167
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Summary and Committee's conclusions
8.1 Institutions for Occupational Retirement Provision, or IORPs,
more commonly known as occupational pension funds, are collective
schemes which manage financial assets on behalf of employers in
order to provide retirement benefits for their employees. The
IORP Directive, Directive 2003/41/EC, sets out a minimum harmonisation
framework for occupational pension schemes and their supervision,
including rules which oblige occupational pension funds to invest
their assets prudently, in the best interest of members and beneficiaries.
8.2 This draft Directive to recast (revise) the IORP
Directive is confined to new rules on the governance of schemes
and the information that schemes should provide to their beneficiaries.
8.3 Both we and the Government have been concerned
about the lack of justification for the proposal, subsidiarity
issues and the practical consequences of the measure. We have
asked to hear from the Government about its continued efforts
to forestall the draft Directive, including the results of its
detailed consideration, with the UK pensions sector, of the potential
impact of the proposal. Early last month it told us that there
was now a considerably amended and more flexible Presidency text,
that the Presidency hoped to secure COREPER agreement to a General
Approach, that the Government would not support such a General
Approach and that, in effect, it still hoped to see the proposal
aborted. However, it did not meet our request for the results
of its consideration of the proposal's possible impact. We presumed
that, if necessary, the Government would continue to oppose the
measure if it were to go to the Council, both on substantive and
parliamentary scrutiny grounds. We asked, when it confirmed this
to us, to have also the assessment of impacts we requested previously.
8.4 The Government tells us now that on 10 December
2014 the Presidency did indeed present the extensively amended
version of the draft Directive for adoption as a General Approach
and that, regrettably, the UK was the only Member State not to
support the compromise. We learn further that attention will now
turn to the European Parliament's ECON Committee, which has yet
to begin consideration of the draft Directive and that the Government
will engage with MEPs to ensure they are fully aware of the concerns
that this proposal raises. We are asked for any view we might
have about the Government engaging MEPs on this file.
8.5 As to our request for the Government's assessment
of impacts of the draft Directive, it explains why the considerable
continuing uncertainty about how this proposal may develop means
a full impact assessment on it would be of limited use, but that
it is engaging with key stakeholders about their views of the
Presidency compromise text. The Government also asks us for any
assessment we make of that compromise text.
8.6 We are grateful for this account of developments
that the Government gives us and look forward to hearing about
the outcome of its discussions with stakeholders about the Presidency
compromise text adopted as the Council's General Approach. Meanwhile
the document remains under scrutiny.
8.7 Concerning our own view of the agreed text,
we do not have a sufficient knowledge of occupational pension
fund matters to offer useful comment. Moreover, even if we had
that detailed knowledge, our ability to comment sensibly would
be hampered as we have no knowledge of the iterations between
the Commission's original text and the General Approach text and
of the reasoning for changes finally adopted. We draw the developments
on this proposal to the attention of the Treasury Committee.
8.8 As for how the Government might engage MEPs
on this proposal, we presume that, whilst it will take any opportunity
to improve the text, against the possibility that the draft Directive
may actually be enacted, the Government will strive to reinforce
doubts in the European Parliament about any need at all for this
proposal.
Full details of
the documents: Draft Directive on the
activities and supervision of institutions for occupational retirement
provision (recast): (35944), 8633/14 + ADDs 1-5, COM(14) 167.
Background
8.9 Institutions for Occupational Retirement Provision,
or IORPs, more commonly known as occupational pension funds, are
collective schemes which manage financial assets on behalf of
employers in order to provide retirement benefits for their employees.
There are around 125,000 such schemes operating within the EU,
managing assets of around €2.5 trillion (£1.96 trillion)
for around 75 million beneficiaries. The vast majority of these
schemes are located in just four Member States: Germany, the Republic
of Ireland, the Netherlands and the United Kingdom. Occupational
pension funds do not play a significant part in pension provision
outside of these four Member States.
8.10 The IORP Directive, Directive 2003/41/EC, sets
out a minimum harmonisation framework for occupational pension
schemes and their supervision, including rules which oblige occupational
pension funds to invest their assets prudently, in the best interest
of members and beneficiaries.
8.11 In March the Commission presented this draft
Directive to recast (consolidate and revise) the IORP Directive.
It was confined to new rules on the governance of schemes and
the information that schemes should provide to their beneficiaries.
8.12 Both we and the Government have been concerned
about the lack of justification for the proposal, subsidiarity
issues and the practical consequences of the measure. When we
considered the matter, in July, we said that, before considering
the document further we wished to hear from the Government about
its continued efforts to forestall the draft Directive, including
the results of its detailed consideration, with the UK pensions
sector, of the potential impact of the proposal.
8.13 Early last month the Government told us that
there was now a considerably amended and more flexible Presidency
text, that the Presidency hoped to secure COREPER agreement to
a General Approach, that the Government would not support such
a General Approach and that, in effect, it still hoped to see
the proposal aborted. However, the Government made no attempt
to meet our request for the results of its consideration, with
the UK pensions sector, of the proposal's possible impact.
8.14 We said that we presumed that, if necessary,
the Government would continue to oppose the measure if it were
to go to the Council, both on substantive and parliamentary scrutiny
grounds. We asked, when it confirmed this to us, to have also
the assessment of impacts we requested previously. Meanwhile the
document remained under scrutiny.
The Minister's letter of 14 December 2014
8.15 The Economic Secretary to the Treasury (Andrea
Leadsom) writes now to update following discussion that took place
at COREPER on 10 December 2014, saying that the Presidency did
indeed present the extensively amended version of the draft Directive
for adoption as a General Approach and that, regrettably, the
UK was the only Member State not to support the compromise. The
Minister then reiterates the three key reasons why the Government
cannot support the compromise:
· both
Houses of Parliament have expressed serious concern about the
proposal and have placed the dossier under scrutiny reserves,
which remain in place;
· while
the amendments to the Commission's original proposal are welcome,
and appear to address many of the Government's key concerns about
the impact of it on IORPs and IORP members, more time is needed
to thoroughly consider the changes, to consult national parliaments
and to seek the views of IORP stakeholders; and
· even
allowing for the Presidency amendments, fundamental concerns about
the proposal remain — no clear need for this legislation
has been established and the policy development process for this
proposal has been particularly poor.
8.16 The Minister adds that the Government has repeatedly
made it clear that we, as well as the Lords European Union Committee,
have expressed serious concerns about the IORP proposal and both
committees continue to hold the proposal under scrutiny reserve.
8.17 The Minister says that:
· now
that a General Approach has been reached in COREPER, attention
will turn to the European Parliament's ECON Committee, which has
yet to begin consideration of the draft Directive;
· the
Government will engage with MEPs to ensure they are fully aware
of the concerns that this proposal raises;
· early
indications are that the European Parliament may also have concerns
that the case for this legislation has not been made;
· serious
reservations about the Commission's impact assessment for the
proposal were set out in a recent report from the European Parliament's
Impact Assessment Unit; and
· given
the extensive experience the Committee has in working with the
European Parliament, she would be very interested in any views
we might have about engaging MEPs on this file.
8.18 Turning to our request for the Government's
assessment of impacts of the draft Directive, the Minister says
that:
· the
Government would not normally undertake a full economic impact
assessment on a proposal which is at an early stage in the legislative
process and before key amendments have been made;
· a full
assessment would usually be made as part of transposition preparations
for a proposal which is close to completing, or has already completed,
the legislative process;
· in the
case of this proposal it was clear from the beginning of Council
discussions that there was little support for adopting the proposal
in anything like its original form;
· concerns
with the original proposal were so fundamental that an assessment
of impacts was not needed to justify those concerns — a
full impact assessment on it would therefore have been of limited
use;
· it is
only very recently that progress has been made in amending the
Commission proposal and those amendments are very extensive;
· it would
appear that the amendments made by the Presidency go a long way
to addressing our concerns about the practical impact of the draft
Directive on occupational pension schemes and scheme members;
· but
there have been limited opportunities to consult stakeholders
in the IORP sector to get a better understanding of likely impacts,
particularly in relation to the latest text presented at COREPER;
· the
Government will be seeking the views of key stakeholders on the
Presidency compromise text early in the New Year and she will
report back to us with those views; and
· she
has arranged for us to have a copy of that compromise text and
would be very interested in any assessment we make of it.
Previous Committee Reports
Fiftieth Report HC 83-xlv (2013-14), chapter 6 (14
May 2014), First Report HC 219-i (2014-15), chapter 13 (4 June
2014), Sixth Report HC 219-vi (2014-15), chapter 3 (9 July 2014)
and Twenty-fifth Report HC 219-xxiv (2014-15), chapter 7 (10 December
2014).
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