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Eversheds comment: Proposed new IORP Directive would cost UK pension schemes �328 million

  • United Kingdom

    27-03-2014

    Commenting on the content of the proposed new IORP Directive, Francois Barker, Head of Pensions at global law firm Eversheds, says:

    “The new IORP Directive is far too detailed and prescriptive. Commissioner Barnier has been stressing for sometime the need for the EU to reduce red tape, but he has just proposed a Directive which is full of it. Whilst we support moves to improve the governance and transparency of pension schemes, this Directive goes too far and some of the proposals would have a significant impact on UK pension schemes.

    "For a start, it would require all schemes to:

    • have a remuneration policy;
    • DC schemes to appoint a depository for the safe-keeping of assets;and
    • all trustees to have professional qualifications, signalling the end of lay trustees.

    "There are also detailed rules on risk management, including the need to compile a new risk evaluation report and the contents of member benefit statements.

    "According to the European Commission’s own figures, implementation of the new IORP Directive would cost UK schemes around £328 million and it would lead to ongoing costs for UK schemes of around £7.5 million per year. Despite this, the proposal has been brought forward without an impact assessment. That said, the contents of the new Directive are still up for negotiation and, one hopes, that a lot of the unnecessary red tape will be stripped out before the Directive becomes law.

    "There is no change in the solvency requirements for IORPs which is good news but EIOPA are still working away on this, so that battle is not yet won.

    "Unfortunately, the requirement for cross-border schemes to be fully funded at all times has been retained, which means that establishing a cross-border scheme will continue to be unfeasible for most European employers."

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