"Bring EU Pension Funds Directive in line with new Dutch pension legislation"

Published on: 19 September 2023

The Netherlands plays a major role in the European pension landscape. European policymakers should therefore work to ensure that the European Pension Funds Directive and the renewed system in the Netherlands run smoothly together. This is the opinion of columnist Wilfried Mulder, strategic policy officer at APG. But, he adds, these policymakers should not paint too simple a picture of the scheme we will get in the renewed system.


In the summer of 2022, the European Commission requested advice (Call for Advice) from the European pension regulator EIOPA on a revision of the European Pension Funds Directive (IORP II Directive , hereinafter IORP II). A European regulation - such as the Pension Funds Directive - that aims at harmonization between the Member States takes precedence over Dutch laws and regulations and must be converted to them. In this case, among other things, to the Pensions Act.


For its part, EIOPA held a public consultation on this IORP revision this spring. A large number of national and international parties responded to this, including the Pension Federation. I was closely involved in this, along with several other colleagues from APG.  


Relevant to the Dutch pension sector and vice versa

The IORP revision is relevant to Dutch pension funds, as the IORP II revision must also be converted to the Pension Act. Incidentally, IORP II has the character of minimum harmonization. This means that after implementing the IORP II rules in their national regulations, member states may also prescribe additional rules if they wish (“gold-plating”). This is not illogical, since it is partly through these additional national rules that member states can establish a regulatory framework for pension funds established in their country that best matches their national pension systems. And those vary widely among most member states. That a country with a well-developed pension system and large pension assets of about 1,500 billion euros, such as the Netherlands, has more far-reaching rules than small pension countries therefore makes sense.


Conversely, the Netherlands is the country with by far the largest pension sector (with about two-thirds of the total pension assets de facto covered by IORP II) and thus about two-thirds of the total in the EU, also important for the EU. And in the Netherlands, the Future of Pension Act (Wtp) is perhaps the largest legal and technical operation for the pension sector ever. Given the enormous role of the Netherlands within the European pension landscape, European policymakers should thus be committed to ensuring that the two developments coincide properly.


Constructive foundation of pension sector

With this in mind, the Dutch pension sector also wants to adopt a constructive position during the further European negotiation process on the IORP revision. It is important to note that EIOPA’s draft advice consisted of two main pillars. First, subjects that are already included in IORP II and may need to be revised, such as prudential and governance regulations, promotion of cross-border activities by pension funds and information and transparency requirements for pension funds towards their participants and pensioners (including the pension overview). And in addition, some topics that have taken center stage since IORP II came into force, namely the international trend of a shift from DB (Defined Benefit) schemes to DC (Defined Contribution) plans and the rapidly growing focus on sustainability and diversity and inclusion.

On the positive side, EIOPA does not make any proposals on these topics that affect the core of the Dutch pension system. For example, no new more onerous capital requirements have been proposed, which were feared at the time of the creation of IORP II. At the same time, having its own European legal framework specifically for pension funds also has value. For example, a separate European pension fund directive can recognize the social nature of pension funds and guarantee appropriate rules in this regard. In addition, the impact of other (sometimes stricter) European regulations can be avoided.



That said, some comments can be made on the EIOPA opinion, for example on the analysis of the shift from DB to DC. The Dutch pension reform is the most prominent recent development within the EU, and EIOPA therefore points to the Netherlands to justify extra attention and regulation for DC pensions. However, this gives the impression that EIOPA is oversimplifying DC pensions. EIOPA mainly identifies themes that are relevant to individual DC. It seems to view participants as consumers who can choose a pension fund and also make choices within the pension plan (such as investment policy), and therefore need a lot of information and protection against “pension risks”. For example, in the form of extra information in our national UPO about costs, risks and sustainability. Here, EIOPA wrongly ignores the differences with Wtp pension schemes that include a role for social partners and risk-sharing and solidarity features.



EIOPA will - partly based on the consultation responses received - finalize its advice to the European Commission. This opinion, which is not binding on the Commission, must be submitted by October 1. After receiving it, the Commission will prepare a proposal for revision of IORP2. However, the mandate of the current Commission expires in 2024, when there will be elections to the European Parliament. A revision proposal will therefore only be submitted by the next Commission, possibly in the fall of 2024. After that, it will be up to the European Parliament and the Council of Ministers to negotiate this revision proposal. Often the overall process until the entry into force of a final directive takes about two years, after which member states usually have another two years to implement this (revised) directive. While these timelines are not yet certain and depend on various factors (including political ones), a significantly shorter lead time for this process does not seem likely. Therefore, it is likely that the implementation of a revised IORP II will come after the transition to our new pension system. The Dutch pension sector has previously advocated keeping these processes separate and will continue to do so in the further process.


Finally, the image that is sometimes conjured up in the Netherlands, that people from Brussels would covet the Dutch pension pots, is not correct. People in other countries often admire our system. Let’s use that to ensure that a revised IORP II fits in well with our future-proof Wtp.