The European Insurance and Occupational Pensions Authority (EIOPA) has issued four opinions in order to assist National Competent Authorities (NCAs) with implementing the IORP II Directive.

The publications cover governance and risk management of pension funds, the practical implementation of the common framework for risk assessment and transparency, supervision of the management of operational risks and supervision of the management of environmental, social and governance (ESG) risks.

EIOPA stated that governance and risk management of pension funds are key activities to ensure the protection of pension scheme members, and the new requirement to conduct an Own-Risk Assessment (ORA) will have a positive impact, but it also poses certain implementation challenges.

One opinion therefore outlines EIOPA's expectations on minimum information content to describe how pension funds conduct and present results from their ORA. In addition, NCAs should review and ensure that the ORA is “forward-looking, considering internal and external emerging developments likely to affect pension funds' future risk profile”.

EIOPA chairman Gabriel Bernardino commented: "The IORP II Directive has profound implications for the governance and risk management of occupational pension funds in Europe.

“In this context, the EIOPA opinions lay the foundation for the future supervisory convergence of pension funds' own-risk assessment to ensure sound risk management for the better protection of members and beneficiaries and alignment with society's sustainability goals."

In the area of operational risks, EIOPA said that with the shift away from defined benefit pensions and the emergence of multi-sponsor IORP providers, NCAs should increasingly pay attention to pension funds' future viability and operational liabilities of defined contribution schemes, including greater supervisory oversight and cyber threats.

Furthermore, as institutions tasked with a social purpose of providing retirement benefits, European pension funds should be exemplary leaders of responsible ownership, the authority said.

“Thus, NCAs should encourage pension funds to consider the impact of their long-term investment decisions and activities on ESG factors through their stewardship role, as well as having regard to the impact of sustainability risks on pension fund liabilities.”

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