In connection with the European Parliament’s adoption of the IORP II Directive (Institutions for Occupational Retirement Provision), the EIOPA and the European Central Bank (ECB) issued measures in 2018 specifying the new regulatory requirements for Institutions for Occupational Retirement Provision (IORP). Starting on the Q3 2019 reference date, eligible entities will be required to report a series of regulatory schedules (Quantitative Reporting Templates, or QRT) in XBRL format on an annual and quarterly basis and submit them to their national competent authority. What issues are raised by this reporting, and what major points should be taken into account by affected IORPs?
Implementation of the IORP II Directive is ensured by two key European regulations according to the type of requirement:
- The supervisory requirement is managed by the EIOPA (European Insurance and Occupational Pensions Authority) and described in decision EIOPA-BoS/18–114, ratified on 19 April 2018.
- Additional statistical information may be collected from eligible IORPs. This information is intended for the ECB and established in Decision ECB/2018/2, ratified on 26 January 2018.
In practice, this does not mean that eligible institutions will have to send two reports to different regulators. Using the same methodology adopted for Solvency II remittances, the EIOPA will be responsible for collecting all the required data (through the national supervisory bodies) in XBRL format before transferring the relevant information to the ECB.
The IORP II Directive was transposed at the national level for each EU country on 13 January 2019. The various supervisory authorities were given the option of adopting additional special measures to allow them to exceed the European regulatory requirements and adapting them to their local conditions. This is notably the case with France and the Netherlands, where IORPs are subject to additional requirements.
Who is affected by this directive?
IORP II reporting is directed at all European Institutions for Occupational Retirement Provision. On the basis of the common rules established by the EIOPA, exemptions or simplified reporting measures are possible. Depending on its size, an entity may thus be exempted from quarterly remittances or may even submit a smaller set of information. These arrangements are detailed independently for each country in the frame of the agreement between the IORP and its national supervisory authority, which may complicate the monitoring of scopes for groups managing pension funds established in multiple territories.
Undertakings must submit their report using regulatory tables defined by the instructions in force, also called Quantitative Reporting Templates (QRT). The data must then be submitted to the EIOPA in XBRL format through the national supervisory authorities. Depending on the instructions and materiality thresholds defined at the national level, certain remitting IORPs may be exempted from using XBRL format. There are four different types of remittances for entities subject to the requirements:
*Under certain conditions, the national competent authorities may exempt the smallest individual entities from quarterly remittances and/or submitting table PF/E.06.02. This decision is governed by an instruction applicable to IORPs located within the territory.
**The final approval for remittance exemption is issued to the IORPs concerned at the discretion of the national competent authorities. Certain supervisory authorities may require detailed remittances for all IORPs.
Report content and type
The reported data can be broken down into three themes.
- Report information and identification of the pension fund: These technical data characterise the report content as well as the nature of the IORP’s activity (PF/E.01.01 and PF/E.01.02). By its nature, this minor segment of the reporting is the easiest to handle for undertakings.
- Financial results for the reporting period and details of capital: The largest segment of the reporting, where a majority of the prudential requirements addressed in the IORP II Directive are covered. Some of this information, such as the balance sheet (PF/E.02.01), may seem familiar to undertakings, but new requirements will prove critical to ensure a high level of compliance of remittances. This is particularly the case with investment details (PF/E.06.02) and the CIU (Collective Investments Undertakings) look-through approach (PF.06.03), requiring highly granular information to be reported.
- Activity details: These requirements cover metrics familiar to undertakings, such as the number of active members or beneficiaries (PF.50.01), transfers during the year, or amounts of premiums and contributions paid (PF.51.01).
Issues for pensions funds
These new regulatory requirements present a major challenge for European Institutions for Occupational Retirement Provision. Entities will have to deal with unprecedented data quality issues, especially in the reporting of investment information. They are guided by two requirements: exhaustiveness (the requirements are extremely granular and must be completed with as much precision as possible) and consistency (taxonomy checks are conducted on and between each table to ensure the cohesion of each report). The disparity of information made available to entities makes this completion work burdensome.
The XBRL format also requires greater operational discipline. The taxonomies used for remittances are regularly updated to incorporate regulatory changes and to introduce new data quality obligations.
On the other hand, this technical framework allows entities to achieve an unprecedented degree of control over their reported information, making it possible to simplify reconciliations between varied data sources or ensure the consistency of remittances throughout the preparatory phase up to the validation of the final amounts. This new approach also benefits from the experience already gained through Solvency II reporting, as the EIOPA decided to use the same taxonomy to manage Solvency II and pension fund remittances. In addition to guaranteeing immediate maturity and reliability for this new reporting, it allows managers of large groups dealing with two types of activity to streamline their production chain between the different entities.