A proposed requirement for larger IORPs to invest at least 2 per cent of their assets under management in venture capital (VC) has drawn criticism from pension professionals, with concerns that the measure could compromise pension funds’ investment autonomy.

Speaking at the CBBA-Europe Annual Conference, European Association of Paritarian Institutions (AEIP) executive director, Simone Miotto, said that this proposal, which is part of a draft report by German MEP and rapporteur, Damian Boeselager, is a “red line that should not be crossed”.

“For me, that is a kind of red line that should not be crossed because I don’t think we should try to oblige pension funds to invest in whatever asset,” Miotto said.

“I’m a big supporter of having pension funds supporting the goals of the Saving and Investments Union (SIU). I think many of the funds could do more, could invest more in growth, innovation, defence, technology, VC, but they should not be forced to do that.”

He also argued against introducing delegated acts into the IORP framework, saying its existing flexibility allows member states to adapt the rules to their national pension systems.

“The IORP is probably the only financial regulation in the EU that, at the moment, doesn’t have any delegated acts, and there is a good reason for that,” he said.

"It is shaped in a way that member states can adapt to different characteristics of their national funds. In my opinion, this shouldn’t change. There shouldn't be any delegated acts.”

PensionsEurope senior policy adviser, Anastasios Pavlos, also raised concerns about the broader direction of the proposed reforms, arguing that the emphasis on consolidation and investment could make it harder to establish new IORPs.

“Instead of having the intention to create more IORPs, we see that the proposal tries to promote consolidation, in order to have bigger IORPs and to boost investments, especially in areas that are very high on the political agenda, like private equity, VC, relative investments and infrastructural defence,” Pavlos continued.

While acknowledging positive elements in the proposal, including changes to transfer rules and authorisation, he questioned whether additional governance requirements, performance assessments, stress tests and delegated acts would encourage the creation of new pension institutions.

“I do not see that, with this proposal, many new IOPRs will be created around Europe, honestly, and that's the main issue,” he said.

However, European Commission Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) head of unit Savings and Investments Union (SIU), Andrea Beltramello, pushed back against concerns that the proposal would force pension funds to consolidate, saying the Commission aimed to remove barriers to scale rather than mandate it.

“On the IORP, we are not in the business of mandating consolidation or an ideal size for these funds, even if one of the underlying themes of the SIU is that, in today’s world, and I’m not talking only about pensions, overall, you need scale to be competitive,” he said.

“We are not mandating consolidation or scale, but we think that there are some elements in the current rules that are discouraging. So what we are doing is not imposing consolidation, but rather we are nudging by removing certain restrictions and limits.  

“The consolidation could be positive for investment, but it’s also positive for those who benefit because bigger can also mean lower costs and better returns.”

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