“IORP” stands for Institutions for Occupational Retirement Provision (the European definition of a pension institution) and the addition “II” denotes that it is the second European directive for collective pensions. IORP II became effective early in 2019. The principal goal of this directive is that pension funds provide sufficient protection to their participants via a sound governance (the structure for managing an organization and the way in which this done) and adequate risk management. IORP II must also ensure that participants and pensioners throughout the EU are informed in the same way about their pension.
Different effects per country
All EU member states must implement the directive in their national legislation. That differs per country, depending on how certain aspects of the directive have already been embedded in the national legislation. If we only look to the Netherlands and Belgium, we already see big differences. The Netherlands, for instance, has already made big steps forward in the pension communication to the participants, while Belgium is more advanced in some parts of governance.
Changes in annual pension statement
You will notice something of the new directive in the field of communication. In Belgium, we are looking into the adaptations we must make in the annual pension statement (pensioenfiche). The annual statement in the Netherlands (UPO) will have some additions. The most important change is that the pension to be reached will be shown in three scenarios from now on: an expected scenario, a pessimistic scenario and an optimistic scenario, depending on the economic development. These scenarios can already be seen on the website mijnpensioenoverzicht.nl. Click here to read a separate article about these scenarios.
Implementation of key functions
As a participant you will notice nothing of the most important change resulting from the directive. That is the implementation of three key functions that are vital to the proper functioning of a pension fund: the risk management function, the internal audit function and the actuarial function. Key holders who are primarily responsible must be appointed for each of these functions.
While pension funds in the Netherlands are busy with the implementation of the internal audit function, this has already been arranged by law in Belgium. That also applies to the DEPF. Our fund also has the actuarial function in place. The risk management function still needs to be implemented. The board of the DEPF considers it important that this function is not performed by one of the parties with whom we are already co-operating. Therefore, the board intends to appoint the independent adviser Jeroen De Soete as risk manager, as soon as the supervisory authority has completed the preceding assessment procedure.
Well on track
The DEPF board and the administrators in Belgium and the Netherlands are well on track to make sure that the fund will meet all the requirements of the European directive.