The EU Council has started technical discussions on the European Commission's proposal to revise the Directive on Institutions for Occupational Retirement Provision (IORP II), aiming to improve retirement adequacy and mobilise pension savings for EU investments. The working document, dated 30 January 2026, serves as the basis for negotiations in the Council's Financial Services working party, outlining key changes to governance, authorisation, cross-border activities, and investment rules.
Key Provisions and Objectives The proposal introduces a mandatory prudential assessment and business plan requirement for all IORP authorisations, moving away from simple registration in some Member States to ensure financial soundness. It also codifies the legal treatment of different pension fund structures (institutional, contractual, hybrid) and clarifies responsibility allocation between a fund and its operating entity. Member States may optionally apply the Directive's rules to currently excluded funded pension institutions. The proposal removes 'size' as a proportionality criterion, focusing prudential requirements solely on the nature, scale, and complexity of an IORP's risks.
Operational and Cross-Border Rules IORPs would be required to have sufficient financial resources to cover operating costs sustainably. The proposal explicitly permits multi-sponsor schemes and, where national law allows, the provision of personal pension products like PEPPs. Cross-border procedures are streamlined, with shortened deadlines, alignment with Solvency II processes, and a simplified notification procedure for certain non-material changes.
Investment and Prudent Person Rule The review aims to clarify the prudent person investment rule to foster a better balance between risk mitigation and returns, encouraging more equity investments in the real economy to support strategic EU transitions. This is expected to channel long-term pension capital into EU equity markets, supporting the green and digital transitions.
Impact on Stakeholders The proposal will harmonise standards across Member States, raising authorisation and governance requirements, particularly where lighter-touch regimes exist. It promotes consolidation and scale through rules facilitating multi-sponsor schemes, cross-border asset transfers, and supervisory tools to address underperformance. For EU pension funds, this means increased compliance costs but potential for better returns and efficiency. National authorities will face new supervisory responsibilities, while EU consumers may benefit from improved retirement adequacy. The reforms aim to boost EU capital markets by increasing institutional investment in equities.
Expected Follow-Up Member State negotiations will focus on the optional application clause and the balance between harmonisation and national flexibility. The European Parliament will also consider the proposal, with trilogues expected later in 2026.
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