The Commission is set to propose revising the rules on pension funds, with a view to enhancing their role in financing the economy

In this interview with Europolitics, Matti Leppala, chief executive and secretary-general of PensionsEurope, lays out his point of view on the review of Directivea2003/41/EC on institutions for occupational retirement (IORP), which is due on 27 March. This review is one of several actions to boost funding for European growth that the Commission will present that day.

Are you happy with the fact that the issue of solvency is not expected to be included in the review?

We have been very much against the idea of establishing for pension funds and other institutions for occupational retirement provision (IORPs) a European risk-based capital requirement framework similar to the one set out in the Solvency II legislation for insurance companies. If we want to have long-term investments into what is in such solvency frameworks considered risky areas, such as infrastructures or listed companies or venture capital, and if pension funds are subject to a solvency framework which put high capital requirements on all these investments, then they will not be able to invest. On the one hand, the Commission is pushing to identify pension funds as long-term investors that are important for growth, and on the other hand, it is pushing for a Solvency II-type of a framework. That does not make sense.


It is very important to understand what the short-term risks are for such long-term liabilities. Banks and insurance companies can go bankrupt. This is not really the case for pension funds, because their liabilities are long term and people cannot do a "pension fund run" in a way they can do a "bank run". Initially, Commissioner Michel Barnier wanted to include such a solvency framework in the review of the IORP directive, but he dropped the idea last May. Nevertheless, preparatory work is continuing this year at the level of the European supervisory authority EIOPA, which is planning to open a three-month consultation on the issue by the end of September.

What are the sensitive aspects of the Commission's proposal for the pension industry?

Risk evaluation of pension funds is one of our major problems. Some of our members are concerned that the proposal is too vague on this point. The proposal gives EIOPA the power to develop the technical part of this issue and to try to introduce the risk-based solvency framework through these...

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