No one would set up cross-border scheme under proposed IORP II – expert

Proposed amendments to the IORP II Directive have failed to produce a sound legal framework for the creation of pan-European pension funds, according to Hansjörg Müllerleile, a corporate pensions expert at German industrial company Bosch.

Speaking at Towers Watson’s bAV-Tag occupational pensions conference in Frankfurt, Müllerleile argued that “nobody would sensibly set up a cross-border pension fund” at the present moment based on the IORP II draft released this spring.

“I could not back such a decision,” he said.

Müllerleile cited in particular ongoing legal uncertainty and the possible introduction of capital requirements.

Earlier this week, EIOPA published its consultation paper on the controversial holistic balance sheet (HBS) approach.

Instead of the HBS, Müllerleile said he would like to see a “bespoke” supervisory framework for occupational pensions focusing on company pension plans or those run by unions and social partners.

“It makes no sense to include competitive pension funds or insurers into this supervisory scope,” he said.

He also argued that national labour law should have priority over supervisory decisions, and that supervisors “should not call for things impossible to fulfil under national legal frameworks”.

As an example, he cited the European Commission’s failure to acknowledge pension contracts negotiated with employee groups such as unions, as well as its “demands for consent” from each individual plan member.

Müllerleile also highlighted the fact the draft IORP II still contained a requirement for cross-border plans to be fully funded at all times, and the requirement to ringfence the assets and liabilities in those pension plans.

“There should be only one supervisory framework for pension funds – no matter whether or not they ever did any cross-border business,” he said.

He said Bosch had tried to accommodate its employees’ increasing mobility in its pension plan but had failed, due mostly to the above-mentioned reasons.

Müllerleile claimed that “10 years had been lost” since IORP I was introduced in 2003, as the directive failed to provide legal certainty or the appropriate legal framework.

Apart from the “disappointing” IORP II draft, he also argued that Europe was lacking sufficient competition among service providers for cross-border pension plans.