Removing the barriers to cross-border European pension provision has proven to be one of the most elusive single market goals. European legislation in this area has been attempted many times over the past ten years but none has made it on to the EU’s statute books. As a result, pension funds remain the only major financial services entities without a ‘European passport’. The value of supplementary pension assets across Europe currently stands at around €2 trillion, corresponding to approximately 25% of the Union’s GDP. If EU countries were to converge to US levels of funded supplementary pension assets, this figure could be expected to double (see note 1). In the context of integrating financial markets accelerated by the single currency, it is anomalous that such an important sector should still fall outside the mainstream of EU legislation. The draft directive on institutions for occupational retirement provision (IORP Directive) seeks to resolve this by providing for common European standards for prudential supervision of occupational pension schemes.

Establishing such a prudential framework would increase supply and competition in the provision of and demand for funded supplementary pensions. It would also increase supply of long-term funds to capital markets, helping to stimulate economic growth and job creation. Financial services providers will be able to play a key role in realising these benefits. Using the directive’s enhanced flexibility, they can deploy their financial expertise to advise occupational pension schemes and manage their assets to generate optimal returns appropriately tailored to beneficiaries needs.