1. IRISH INSTITUTE OF PENSIONS MANAGERS SEMINAR ANNE MAHER Chief Executive19 February 2004 The Pensions Board WHAT IS HAPPENING IN EUROPE?

2. 2. AGENDA  EU Pensions Directive  Tax Co-Ordination  Joint Pensions Report by Commission and Council  EFRP Proposal  Opportunities for Ireland?  And Other EU Initiatives Affecting Pensions …

3. 3. EU PENSIONS DIRECTIVE General  Came into force on 23 September 2003  EU Member states have 2 years to implement i.e. must implement by 23 September 2005  Key aims  ensure protection for pension plan members  liberalise investment environment for pension plans in EU  remove barriers to cross-border pension plans  Differentiates between national pension plans and cross- border plans  Provides legal framework for Pan-European pension plans

4. 4. EU PENSIONS DIRECTIVE Implementation Process  Establishment of 2 EU Committees  European Insurance and Occupational Pensions Committee (EIOPC) consists of Finance Dept officials / policy level  Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) consists of supervisors/technical level  Irish national plan for implementation process  Not yet decided  Issues to be agreed include time frame, consultation process, separate legislation or inclusion in other legislation  Aim is to implement in April 2005 through Social Welfare Act 2005  National decision on content of implementation involves  Agreement on where current Irish legislation needs to be amended to meet Directive  Decisions to be made where member state can decide approach

5. 5. EU PENSIONS DIRECTIVE Requirements to be met in National Legislation Article 1 - 5 (Scope) Directive must be applied to institutions for occupational retirement pensions (IORPS) Article 6 - 8 (Activity) IORPS must  limit activities to retirement benefit related operations and activities arising therefrom  be a separate legal entity Article 9 - 12 (Conditions) IORPS must  be recognised by local supervisory authority  be run by persons of good repute and have professionally qualified management  have proper rules  have technical provisions certified by an actuary or other similar specialist  have regular financing for any guarantees  provide appropriate information to members including annual accounts, annual reports and statements of investment policy principles  for cross-border activity have prior authorisation from competent authorities of home member state

6. 6. EU PENSIONS DIRECTIVE Article 13 - 14 (Competent Authorities) Information must be provided to competent authorities who must have powers of intervention Article 15 - 17 (Technical Provisions and Funding) There must be  prudent calculation of technical provisions and adequate funding for pension liabilities  for cross-border activity there must be full funding at all times  where IORPS is providing biometric risk cover or guarantees they are subject to same solvency requirements as life assurance companies Article 18 (Investment) Investment of assets must be  in accordance with ‘prudent person rule’  in line with nature and duration of pension liabilities  diversified  subject to limits on self-investment Member states may only apply limited quantitative investment restrictions (up to 70% in stock and 30% in foreign currencies must be allowed) For cross border activity host member states may impose investment restrictions to IORPS in home member states provided same or stricter rules apply in host member state Requirements to be met in National Legislation (continued)

7. 7. EU PENSIONS DIRECTIVE Article 19 (Management and Custody) IORPS must be allowed to appoint investment managers or custodians in another member state Article 20 (Cross-border Activity) A sponsoring undertaking in one member state (host state) may set up an IORP in another member state (home state). In such cases  supervision is by home state  prudential rules of home state apply  social and labour law of host state applies Article 21 (Co-operation) Member states and Commission must co-operate to apply Directive and create conditions for cross-border membership Article 22 – 24 (Implementation) Member states must implement into national legislation before 23 September 2005 Requirements to be met in National Legislation

8. 8.  Application to pension business of insurance companies covered by Life Directives  Exclusion of pension schemes with less than 100 members (de minimis rule)  Whether PRSAs fall inside or outside scope of Directive  Designation of competent authorities for different provisions  Requirement for additional national requirements to be attached to IORPS located in Ireland  Whether to introduce quantitative investment rules EU PENSIONS DIRECTIVE Areas where Ireland needs to decide approach

9. 9. EU PENSIONS DIRECTIVE Regulatory conditions needed for Pan European Pensions  Separate legal entity  Meet information to members, funding, diversification and security of assets, freedom of investment requirements of Directive  Recognition by home country supervisor  Special conditions  authorisation of fund in home country  fully funded at all times  prudential rules: home country of fund  social and labour laws: host country of beneficiaries  Each state may prescribe additional investment constraints relating to its “section” provided such constraints not greater than those imposed on local schemes in that state  In practice may require ring fencing of each section’s assets

10. 10.  European Court of Justice (ECJ) Cases (e.g. Wielockx, Safir, Danner, Skandia)  EU Communication of 19 April 2001  The elimination of tax obstacles to the cross-border provision of occupational pensions  Current moves to enforce  Commission referred Denmark to ECJ in July 2003  Infringement proceedings opened against Italy, Belgium, Spain, France and Portugal in February 2003  Infringement procedures also opened against UK and Ireland in July 2003 TAX CO-ORDINATION

11. 11.  Co-ordination reports from all member states in 2002  Joint Report published in March 2003  EU-level analysis of national pension system and ability to face demographic ageing  11 agreed common EU pension objectives  Objectives relate to  Adequacy  Financial Sustainability  Responding to changing needs JOINT COMMISSION/COUNCIL REPORT ON ADEQUATE AND SUSTAINABLE PENSIONS

12. 12.  European Federation for Retirement Provision (EFRP) Model for Pan-European pensions  Called EIORP 2005  Involves  Notional, national sections  Within single indivisible fund EFRP PROPOSAL

13. 13.  Home for Pan European Pension Funds?  Opportunities for  Asset Management  Life and Risk Management  Administration  Consultancy  Traditional pension players (UK, NL, Irl) have expertise/experience  Ireland response so far is new fund vehicle known as Common Contractual Fund (CCP)  Pan-European Pension Task Force now looking at opportunities OPPORTUNITIES FOR IRELAND

14. 14.  Pension portability – consultation with Social Partners  Equality Directives – adopted and in progress  Gender and Supply of Goods and Services Directive – in draft stage AND OTHER EU INITIATIVES

15. 15.  After years of talk at EU level things ARE NOW happening  And they ARE GOING to affect Irish pensions  So let us make sure we use the opportunities… CONCLUSION