The German financial supervisory authority, BaFin, is set to conduct a survey of Institutions for Occupational Retirement Provision (IORPs) to gauge the costs of running the schemes, according to the occupational pension association aba.
The association expects BaFin to send out questionnaires for the survey with explanations to IORPs at the end of November, with a deadline to reply to questions of around 12 weeks, it said.
The survey has been delayed compared to the original plan, aba said, adding that changing the timetable for the costs review means that asset management companies will be better positioned to provide MiFID II-compliant information for Spezialfonds to the IORPs.
In the survey occupational pension schemes will list all their costs, although questions about capital investment, based on the requirements set by the European Insurance and Occupational Pension Authority (EIOPA), are very specific, aba said.
Listing information on sponsoring companies is likely to represent a challenge in some cases for IORPs, it added.
In October last year EIOPA sent out an opinion statement on the supervisory reporting of costs and charges of IORPs, saying that transparency and accuracy of costs and charges, in combination with risks and returns, is essential for the scheme, the social partners and supervisory authorities to assess whether occupational pension schemes can function, and the impact on pension savings.
EIOPA mentioned the numbers provided by the Organization fro Economic Co-opoeration and Development (OECD), pointing at an over 20% reduction in pension income on annual costs and charges of 1% of assets.
EIOPA was pushing IORPs to improve reporting on the costs of running the schemes, that in turn would help supervisory authorities in member states to have a clearer view of the costs occupational pension schemes face in the EU.
The lists of costs included in the EIOPA’s statement included investment costs (fiduciary fees, internal management costs incurred for the management of assets, costs of safekeeping of assets, remuneration to the external asset manager), transaction costs for the acquisition and disposal of investments, administrative costs and costs paid by sponsors.
BaFin’s executive director Frank Grund explained at the time that EIOPA’s statement raised concerns because it would include costs incurred by IORPs for indirect capital investments, especially in investment funds, and expenses borne by the sponsoring companies.
However, he added that “the idea of disclosing these costs and examining whether they are material is understandable. In the Netherlands, a comparable approach has probably led to more transparency and significantly lower costs,” he said.
For Grund national regulatory authorities should first check whether there is a “cost problem” in the domestic markets before establishing a permanent reporting system for IORPs on the issue.
Therefore BaFin will carry out a survey, deciding afterwards on whether to exclude reporting costs on specific categories of defined benefit schemes, he said.
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