According to Eversheds, the proposed new Institutions for Occupational Retirement Provision (IORP) Directive is far too detailed and prescriptive and would cost UK pension schemes £328m.
Francois Barker, head of pensions at the law firm, said: ‘Commissioner Barnier has been stressing for some time the need for the European Union to reduce red tape, but he has just proposed a directive that is full of it. While 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.’
Barker added that 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.
He continued: ‘According to the European Commission’s own figures, implementation of the new IORP Directive would cost UK schemes around £328m and it would lead to ongoing costs for UK schemes of around £7.5 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 is 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.’