German pension fund association lauds Italian take on IORP II Directive

The amendments made by the Italian EU Council presidency to the revised IORP II Directive will lead to “considerably lower implementation and follow-up costs” than the initial draft by the European Commission, according to Peter Gramke, head of Internal Audit at the €4.2bn SOKA-BAU, a supplementary pension plan for construction workers in Germany.

Speaking at the German pension fund association’s (aba) annual conference, Gramke – one of the aba’s experts on European affairs – pointed out that the new proposal no longer contained any delegated acts linking IORP II to other legal frameworks, which “eases the burden considerably – also regarding costs”.

He said there were fewer supervisory reporting demands than a year ago and that the Directive, were it to be implemented in its current form, would be a “limited burden” on pension fund costs. 

He said the information requirements had been cut considerably, adding that the Commission had “completely underestimated” these costs.

Gramke also commended the Italians on changing the wording in the definition of IORPs from financial institutions to “pension institutions with a social purpose that are active on financial markets”.

“This is an important [distinction] that will change regulation over the medium term,” he said.

But Gramke said he was unsure why the Italians re-introduced an element to IORP II similar to the compliance function under Solvency II.

“It is an artificial link, a bit torn between the internal control system and the revision, so it is basically a compliance element – then why not call it that?” he asked.

One member of the audience voiced concerns that the chapter on ’risk evaluation for pensions’ in the IORP II was modelled too closely on the ORSA requirements under Solvency II.

Dietmar Keller, head of division at German supervisor BaFin, said the requirement to calculate the funding needs and sponsor support would be tantamount to “introducing the holistic balance sheet (HBS) approach via the back door”.

He said he was convinced that EIOPA would “continue to work on HBS” and bring it back to the table after the current commissioner’s five-year tenure, if not before.