1. EU – IORP Directive being considered by European Parliament – Rapporteurs within the European Parliament are reviewing the proposed new IORP Directive with their reports due by the Autumn. Current indications suggest influential MEPs support moves to make the Directive more principles-based and they are also considering changes to facilitate the establishment of cross-border schemes.

Action: Lobby Rapporteurs to ensure key issues are addressed. Read more

  1. EU – EIOPA stress tests and quantitative assessments are underway – With the assistance of national regulators, EIOPA is conducting a stress test for DB and DC IORPs across 17 European countries to assess the resilience of IORPs to adverse market conditions and increasing longevity. At the same time, EIOPA is also carrying out a quantitative assessment to gather data on the potential uses for the holistic balance sheet which will inform its advice to the Commission on EU solvency rules for IORPs.

Action: Work with national regulators to provide relevant data by 10 August 2015 so that EIOPA’s data set is as complete and accurate as possible.

  1. Belgium – Increase in statutory legal pension age approved – The Belgian Council of Ministers has approved a preliminary draft Act concerning the increase of the statutory legal pension age from 65 to 66 by 2025 and to 67 by 2030. Transitional measures are being considered. The age for early retirement is expected to increase to 63 in 2019 for people with a career of 42 years (with some exceptions).

Action: Monitor proposals and the potential impact on occupational pension plans.

  1. France – New tax and social security rules for medical expenses schemes provided by employers – Since 1 April 2015, to continue to benefit from tax and social security exemptions on their contributions to medical expenses schemes, employers have had to cap the reimbursement of some medical expenses. For pensions, employers must put in place a compliant insurance contract and implement a unilateral decision or collective bargaining agreement that matches the insurance contract. Benefits can be maintained until 31 December 2017 subject to certain conditions.

Action: Determine when this will apply in your situation to ensure sufficient time to implement changes and avoid a social security reassessment.

  1. Germany – Federal Government plans to allow trade unions and employer associations to manage their own pension funds – Under these plans trade unions and employers associations should be entitled to manage their own pension funds – the so-called collective bargaining pension fund (“Tarifrente”). The new model may force small and mid-sized companies to offer occupational pension plans to their staff via collective bargaining agreements. However, it would allow such companies to organise their own pension fund with the trade unions without the risk of further contingent liability risks (“Ausfallhaftung”): “Pay and forget”!

Action: Prepare for this change and follow the plans through employer associations. Latest updates from our European experts

  1. Ireland – New guidelines on financial management of DB plans issued – The Pensions Authority has published formal guidelines on the financial management of defined benefit (DB) plans. The guidelines provide practical guidance on the steps DB trustees should take to understand the financial position of their plan and to manage plan funding and investment. Where the Pensions Authority becomes involved with a DB plan, it will assume that the trustees have addressed matters covered by the guidelines.

Action: Trustees need to review these guidelines and consider the impact on their plan..

  1. The Netherlands – DC members able to buy split annuities – Due to very low interest rates, the Dutch legislator is relaxing existing rules regarding the need to buy an annuity with capital held within a defined contribution (DC) pension plan. As a result, from 1 July 2015, members are now allowed to use some of this capital to purchase a 5-year annuity while the rest can continue to be invested and then used to buy a lifelong annuity at the end of this 5-year period. This new option is expected to be replaced by a more sophisticated solution in due course.

Action: Check new rules and inform your plan members/employees in advance.

  1. The Netherlands – New pooled pension fund vehicle moves a step closer – The creation of a new pension vehicle to enable pension plans to be pooled has moved a step closer. In mid-June the Second Chamber of the Dutch Parliament accepted the law on the ‘Algemeen Pensioenfonds’, which could be used to merge (smaller) company pension funds. This fund might also enable DB and DC benefits to be held within the same pension plan. However, there might be some obstacles before this vehicle is up and running, which is planned for January 2016.

Action: Employers should consider whether this new vehicle may be beneficial and, if so, discuss it with their pension fund board.

  1. Switzerland – Pension plans experiencing funding strain – The removal of the minimum exchange rate of the Swiss franc to the Euro in January and the move to negative interest rates by the Swiss National Bank has put severe funding pressure on most Swiss pension plans. As a result, many plans are likely to become underfunded and employer and member contributions may have to increase to address this.

Action: Pension plans and employers need to assess the impact on their plan and monitor the need to increase contributions and/or reduce benefit payments.

  1. UK – New governance requirements for DC plans – New legal requirements mean DC trustees must design default funds in members’ best interests and regularly review them, prepare a statement of investment principles for default funds and ensure core financial transactions are processed promptly and accurately. They must also prepare an annual governance statement signed by the Chair.

Action: Identify and implement actions needed to comply. Read more