EUROPE - The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) has called on the European Commission's Occupational Pensions Committee (OCP) to provide greater clarity on certain definitions of rules for implementing Institutions of Occupational Retirement Provision (IORPs).

Details of a report by CEIOPS, concerning key aspects of the implementation of the IORP directive, show the process has been largely smooth as the supervisory body found there is "little evidence of major issues arising" from the differing interpretations by member states of the directive.

That said, there are "some areas where action appears to be needed for clarity and for supervisory convergence" according to CEIOPS.

More specifically, it says member states have "definitional differences" concerning what constitutes cross-border activity, and the EC should therefore provide clarification.

‘Ring-fencing' is also a term widely interpreted to mean different things to different member states, says CEIOPS, and there appears to be "divergence" over the definition of risk capital markets and whether pension funds are therefore allowed to invest in them, so further clarification is needed from the EC, according to CEIOPS' initial review.

Given the huge disparity between defined benefit and defined contribution arrangements, and how they are in turn defined across the European Union, one strong concern CEIOPS is keen to investigate further is whether the diverse reporting requirements is in fact creating an unlevel playing field, where the IORP directive was designed to allow cross-border activity if appropriate.

Additional work should also be conducted to investigate the calculations required by member states, said CEIOPS, when assessing the ‘fully-funded' position of pension funds as some jurisdictions, for example,  require immediate recovering plans while others allows funding levels to be met over 15 years.

"The diversity and variations in approach to the calculation of technical provisions emerged as a strong theme…given this diversity, much more work is needed to gather the evidence of why these difference exist…the OPC also recognises that there is an important question to be answered as to whether the diversity of approach in itself impact adversely on members and beneficiaries."

Use of insolvency protection institutions also needs further analysis, said CEIOPS, as the body noted they exist in only a small minority of states, to ensure backup and delivery of the pension promises made should an employer become insolvent.

"CEIOPS considers that further work in this subject should be part of the overall research in the various mechanisms used in order to ensure that members' and beneficiaries' benefits are protected," said the report.

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