Germany’s Deutsches Aktieninstitut (DAI) has welcomed proposed amendments to the European Commission’s (EC) reforms to the EU occupational pension framework, including removing or relaxing 'strict' stress tests.

The EC has introduced a legislative proposal to amend the IORP II directive, aiming to ensure occupational pension systems evolve to provide attractive returns.

In its response, DAI said the proposal to provide more generous limits for productive investments, such as equities and venture capital, was welcome.

It also praised the proposed streamlining of authorisation and notification procedures to facilitate cross-border activities.

However, it stated that the “excessively strict” stress tests and introduction of the Solvency II framework for IORPs with defined benefit schemes were negative developments.

MEPs and the Council of the EU have submitted amendments to the EC’s proposals, which would remove or relax stress tests and clarify that IORPs will not be required to apply Solvency II regulations.

DAI welcomed these amendments, noting that its impact assessment to a typical Pensionskasse, the largest pension scheme in Germany falling within the scope of the IORP II Directive, showed the application of Solvency II would require additional assets of 28 per cent of total assets.

Extrapolated across all Pensionskassen in Germany, this would amount to additional costs of €58.8bn.

“Strengthening EU-wide occupational pensions ensures that workers in Europe improve their old age provisions,” DAI stated.

“Investing at least part of the pension assets in shares of European companies helps to finance growth, innovation and employment.

“The EC’s legislative proposal to amend the IORP II directive correctly identifies the need for occupational pensions to evolve, recognising that they must offer attractive returns to become an important component of retirement income.”

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