In 2020, defined contribution expenses in the European Economic Area (EEA) were low, standing at €1.8bn compared to the total investment income, €17.7bn, the European Insurance and Occupational Pensions Authority (EIOPA) has reported.

For the first time, its Cost and Past Performance Report – 2022 includes some analysis on IORPS, following the implementation of the IORP II Directive and the availability of a European centralised reporting framework.

The report provides some limited additional analysis at IORPs level, based on pension funds rather than following a members’ perspective, as information on the proportion of costs and income (and so of the net performance) passed onto members is not available.

EIOPA found that in 2020, total expenses corresponding to IORPs DC schemes were mainly driven by investment expenses. Total investment income was driven by unrealised gains. In relation to expenses, at member state level the proportion of administrative expenses is above 50 per cent of total costs for eight member states, while in three others investment expenses represent more than 90 per cent of the total.

The asset allocation in DC funds differs across members, but at EEA level around 30 per cent is allocated to investment funds. Direct investments in government bonds represent 21 per cent and listed equity 18 per cent. With respect to DB schemes, DC ones tend to invest more in equity (17 per cent vs 11 per cent) while also relying more on reinsurance strategies (10 per cent vs 1 per cent).

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