EU funding requirements and stress test for pension funds (IORPs)

Background

Occupational Pension institutions (IORPs) have to follow funding rules. For instance, in The Netherlands applies the FTK regime. The regulatory requirements differ considerably across EU memberstates. Differences do for instance exist with regard to the discount rate (fixed, market rate), ambition level (nominal, real) and actuarial assumptions to be used. Moreover, various security mechanisms are acknowledged: in The Netherlands solvency buffers on the IORPs balance sheet are the main mechanism while in many other countries plan sponsor covenants or a national guarantee fund for non-performing IORPs are available. In the meantime, multinational employers are struggling with the diverging requirements for the numerous local pension institutions. In addition, the newly founded cross-border pension institutions leverage on the European passport thereby actively looking into regulatory arbitrage openings.

At EU level initiatives are underway to streamline the funding requirements for pension institutions and aim for a gradual convergence process. Same risks, same rules adagio. In Autumn 2016 the revised IORP Directive has been adopted. There will be no EU harmonized IORP funding rules, but the objective is to introduce an EU harmonized stress test for IORPs, alike for the banks. A first stress test for DB and DC schemes was done in 2016; a more fine-tuned stress test is currently under development.

Are you interested?

Let us know your motivation and send it together with your CV and list of grades to SQ@robeco.nl.

References

Inventorize, compare and analyse the key differences in funding requirements for occupational pension funds (IORPs) in The Netherlands (FTK), in the intended EU stress test and – if time permits - also in 2-3 other relevant EU memberstates. Extra: Assess whether there will be any impact of the (EU) initiatives on the optimal investment strategy of a Dutch pension fund.

Output

Next to the thesis, we would welcome a summary version of the thesis in the format of a Robeco White paper and a presentation/handout (both for internal knowledge sharing and for clients) .

Parties involved

Robeco Investment Research is available to pinpoint the research question, gather the relevant information and assist in the analyses. Moreover, the intention is to contact various parties (interviews, meeting) to gain more insights: mainly international policymakers e.g. DNB, EIOPA, foreign supervisor, European Commission) and/or cross-border IORPs and consultants.

Literature

Various DNB, EU and EIOPA publications and surveys. See https://eiopa.europa.eu/regulation-supervision/pensions