The European pensions industry has given a cautious welcome to the revised IORP Directive but expressed concerns about the potential impact of the new risk evaluation required of pensions funds.

Under the Directive, the Risk Evaluation for Pensions would be performed “regularly and without delay” in instances where a scheme’s risk profile undergoes a “significant” change – examining internal risk management, funding needs and requiring qualitative assessments of covenant, operational and climate change risks.

Joanne Segars, chair of PensionsEurope, said it would “pay attention” to the delegated acts by the European Commission that would clarify the scope of the new risk framework, to then be drawn up by the European Insurance and Occupational Pensions Authority (EIOPA).

UK consultancy Punter Southall echoed Segars’s reservations about the new risk framework, with its head of research Jane Beverley saying its evolution would need to be scrutinised, lest the industry see certain quantitative measures introduced “through the back door”.

“It would be unfortunate, to say the least, if, having dropped the idea of solvency funding for pensions, the Commission were to bring in some of the key elements of the holistic balance sheet through its new governance requirements,” she said.

The Directive specified that the Commission’s delegated act should not introduce “additional funding requirements beyond those foreseen in this Directive”, seemingly ruling out such a move.

Alfred Gohdes, chief actuary at Towers Watson in Germany, said the risk framework appeared to be the only fundamentally new governance burden for the German occupational sector.

However, he added: “Dependent on how it is fleshed out by EIOPA, it could lead to significantly increased requirements and costs.”

The inclusion of the new risk evaluation requirements was welcomed by Insurance Europe, the industry’s lobby group, which noted that the system would allow pension funds to “assess the real risks of their business”.

However, it was unhappy with the absence of quantitative requirements for the rival industry that brought regulation in line with Solvency II, noting that the Directive was “incomplete” as a result.

The group’s director general Michaela Koller argued that it was an issue of consumers deserving the same level of protection, regardless of which of the two industries provided the pension benefit.

“To ensure that this is the case,” she said, “we call on the European institutions to include a clear timeline in the IORP Directive for the Commission to develop appropriate quantitative requirements.”

Other commentators, such as Francois Barker, head of pensions at law firm Eversheds, lamented the “far too detailed and prescriptive” nature of the proposals and noted that, despite internal market commissioner Michel Barnier’s repeated pledges to cut red tape emanating from Brussels, the Directive was “full of it”.

The European Association of Paritarian Institutions’ secretary general Bruno Gabellieri said he regretted that the Directive still had a “strong internal market point of view”, which it said did not fully appreciate the important role of social partners in providing occupational retirement provision, or the characteristics of IORPs.

He added: “Governance and information requirements for IORPs executing agreements between social partners cannot be the same as for pure financial institutions selling products to consumers.”

The concerns that an approach applied to the remainder of financial institutions was simply being transferred was one shared by Andreas Zakostelsky, chairman of Austrian pension association FVPK.

“The rules will lead to additional expenses and do not fit with the occupational pensions system,” he argued.

He added that Austrian pension funds already were compliant with the vast amount of the new requirements, but that it would nonetheless increase the regulatory burden and result in increased costs.

Matti Leppälä, secretary general of PensionsEurope, also raised concerns about the costs associated with the proposals, noting that the standardised Pension Benefit Statement would “drastically” increase administrative costs without resulting in added value to members.

“We therefore need an adaption of the information requirements based on the pension promise given,” he said. “DB, DC and hybrid schemes bring different benefits, choices and risks to the members. This needs to be taken into account.”

While Dave Roberts, senior consultant at Towers Watson, criticised the lack of changes to cross-border funding regulation, he was mostly positive about the proposals for improved governance and transparency.

“Few would argue against such aims,” he said, “but it makes no sense to agree such measures without assessing whether the improvements they are expected to bring represent value for money – especially on a day when the UK government is trying to emphasise the importance of low charges.”

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