Jaap Maassen has taken over the presidency of the European Federation for Retirement Provision (EFRP), which represents occupational/supplementary pension plans throughout the EU, at a crucial time. Last May the EU took in 10 new members, and next September the EU’s pensions directive comes into force.
So although he has only been in the post since October he already has an overflowing in-tray.
“One of my major challenges will be to ensure that the EFRP membership reflects the new shape of the new 25-strong EU and that they can meet the requirements set out by the EU directive,” he says. “It is our role as the EFRP is to help member states to implement the various changes, and with regard to the precise interpretation of the directive we have issued a legal commentary on the directive from the London office of law firm Steptoe & Johnson.”
He lists the directive’s key points: the prudent person rule, the access to cross-border custodian and asset management services, information to members and beneficiaries and whether member states will use the option to allow life assurers the option to provide institutions for occupational retirement provision IORPs.
“And last, there is the question of funding where the focus on what level of funding is sufficient and the technicalities that surround discussions of full funding, like what interest rates to use, and what cover ratio and asset liability ratio are required,” he says.
But a major focus is on portability. For Maassen’s predecessor, Alan Pickering, one of the two major challenges facing pensions in Europe, “and therefore the EFRP, is furthering the cause of modern and flexible labour markets”.
Maassen agrees. “We support the whole concept of labour mobility and I am very much in favour of portability,” he says. “I started the whole issue in the Netherlands years ago, I know it is a highly complex terrain fraught with many difficulties.”
Denmark and the Netherlands are the only countries where portability is operative in second pillar systems and the problems associated with introducing it more widely have already crystallised into diverging views of how this should be done. On the one hand there are those who hold that portability should first be developed at state level and on the other those that want it brought in on a cross-border basis.
“Cross-border issues are among the most sensitive as far as we have been able to gather through interviews and a survey because most countries have not developed the concept of national portability so it is difficult to deal with cross-border portability,” says Maassen. “We have suggested that countries be given time to develop the concept of national portability first.
“However, the Commission favours doing it the other way around on the basis that starting with cross-border portability will stimulate discussions on national portability. I can see the viewpoint but it is not a quick fix and it will take a long time before we have sorted out all the technical issues. “We believe that minimum criteria have to be set with regard to age, waiting and vesting periods, the preservation of the deferred entitlement and indexation, which is a key issue in most countries. Our view is that time should be allowed for organic convergence. I hope that in the next three-to-five years we will have a concept of portability.”
But the EFRP will certainly have some lobbying to do if its view is to prevail. The Commission is proposing a directive on portability, and past experience suggests that Commission solutions can be costly and that this could in turn be a disincentive to employers to grant more occupational pensions. “We have been warning that if the issue of portability is forced too much there is a potential risk that employers will abandon occupational pensions or switch to individual accounts,” says Maassen. “You might be throwing the baby out with the bath water. So because of the costs involved we feel that a recommendation might be more appropriate than a directive.”
Pickering’s other major challenge was the constraining of over-intrusive regulation. And here Maassen will have another fight on his hands. While introducing a system of home-state supervision, the directive left some residual competence for host state supervision in the fields of labour law and the setting out of requirements for information to members and beneficiaries. However, national administrations have proved themselves reluctant to relax their control and mutually recognise the competence of other regulators.
Maassen concedes that this might be a major challenge, but suggests that the Committee of European Insurance & Occupational Pensions Supervisors (CEIOPS) is there to sort out the details and ensure that the home-state principle applies where people take out a cross-border pension.
But the recently formed CEIOPS, which is made up of representatives from the member state insurance and occupational pensions supervisory authorities, has also come under fire for holding closed meetings and not releasing reports, with some states being reluctant to let the chairman distribute supporting documents or meeting agendas.
But Maassen is prepared to be forgiving, or at least diplomatic. “I have been party to similar discussions in the Netherlands – on issues like what authority should the DNB have, what is full funding, what interest rate to use when considering full funding – it is all fairly technical and complicated and I think that CEIOPS wants to first arrive at some semi-concrete decisions before it starts communicating,” he says. “I think it will take a long time before they can arrive at a harmonious decision, and at the moment they probably don’t have a lot to say.”
And then there’s the enlargement. Maassen notes that this may be a contributing factor to CEIOPS’ failure to meet the level of transparency expected from a European consultative body. “Can you imagine 25 member states participating in a meeting?”, he asks. “And a lot are at different stages of development. So while the more mature countries have thought about issues like full funding many countries are still in their infancy as far as these issues are concerned.”
Maassen’s challenge will be to ensure that they all apply the EU pensions directive, and to this end to shepherd them into the EFRP. “Cyprus and Malta have just got a mono-pillar system while Hungary and Poland have three-pillar systems,” he says. “Some have capital-funded systems, other have pay-as-you-go systems. As my predecessor Pickering often noted, the challenge for the years to come will be managing diversity. And that’s the key issue. We will continue to see diversity developing. We’ll have DB systems based on final and average earnings, we’ll have hybrid systems, and so on.
“The EFRP is helping in various ways: exchanging information, best practice examples and in particular we help by explaining what the EU directive means in practice” he adds.
So, a busy time ahead for Maassen. But is he up to the job? He comes to the EFRP from ABP where he is director of pensions but before that he worked for Shell for 21 years in several roles including personnel, finance, trading oil and chemicals, and as director of pensions in the Shell pension fund. Pickering says that he is “ideally placed to respond to the challenges.”
“He will be able to carry forward two of the EFRP’s principles — diversity and inclusiveness,” says Pickering. “The Brussels-based European infrastructure can be a daunting challenge but it is one where patience is a virtue so long as it does not lead one to being supine. I think Jaap has the right amount of patience but knows when one has to remove the velvet glove and use the iron fist.”

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