IORP II Directive

The directive on the activities and supervision of institutions for occupational retirement provision (IORP II Directive) came into effect on 13 January 2017.¹ It replaces the existing IORP Directive and must be transposed into national law within two years.²

The principal regulations and amendments contained in the IORP II Directive – as compared with the existing directive – are as follows:

• The scope of the directive remains unchanged. In particular, pension provisions and support relief funds (Unterstützungskassen) are not covered by the directive, as before.
• The IORP II Directive now also contains regulations on cross-border portfolio transfers. In addition, the deadline for communicating the relevant requirements of social and labour law in the case of cross-border activities is reduced from two months to six weeks. Moreover, the member state in which the institution carries out cross-border activities may no longer lay down investment rules for cross-border IORPs operating in its country.
• The existing quantitative regulations on technical provisions and own funds are largely retained.
• In contrast, the IORP II Directive expands the qualitative requirements significantly. For example, in future undertakings must have key functions in place (risk management function, internal audit function and, where applicable, an actuarial function) and carry out an own risk assessment (ORA).
  With respect to investment rules, member states will continue to have the option to prescribe quantitative requirements. However, the prescribed investment limit for shares may not be lower than 35%.
• The IORP II Directive adds considerably to the obligations to provide information to members, beneficiaries and also potential members. For example, a pension benefit statement with standard minimum contents will have to be provided in future. Undertakings must also inform members and beneficiaries if they have issued a guarantee and if reductions in benefits are possible.
• The Solvency II Directive³ will also be amended as a result of the IORP II Directive. The definition of "reinsurance" is being changed to include the provision of cover by a reinsurance undertaking to an institution that falls within the scope of the IORP II Directive.

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