The DWP consultation on miscellaneous amendments (referred to above in relation to statutory revaluation), also includes draft changes to implement requirements of a European Union Directive (the Institutions for Occupational Retirement Provision (IORP) Directive) relating to pension schemes investing in the sponsoring employer.
The requirements of the IORP Directive impose restrictions on the proportion of a scheme's resources that may be invested in the sponsoring employer. Such investments are known as employer-related investments or ERIs. Although ERIs are already limited by existing Investment Regulations to 5% of the market value of a scheme's resources (the limit specified in the Directive), transitional arrangements currently in place in the UK disapply these restrictions to schemes that had ERIs in excess of 5% before 6 April 1997. The transitional arrangements also include exemptions relating to investment in sponsoring employers by Collective Investment Schemes, employer-related investments derived from members' voluntary contributions and investment in some qualifying insurance policies.
Under the terms of the IORP Directive, however, the current UK arrangements cannot continue beyond 23 December 2010 and for this reason the draft regulations put forward by the DWP remove the transitional arrangements/exemptions from this date.