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Institutions for occupational retirement provision

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Institutions for occupational retirement provision

This Directive ensures a high level of protection for members and beneficiaries of pension funds. A specific legal framework for institutions for occupational retirement provision (IORPs) allows them to offer a maximum degree of security and efficiency.


Directive 2003/41/EC of the European Parliament and the Council of 3 June 2003 on the activities and supervision of institutions for occupational retirement provision. [See amending acts].


The Directive lays down rules for the taking-up and pursuit of activities carried out by institutions for occupational retirement provision. It aims to ensure a high level of protection for future pensioners (members and beneficiaries of pension funds) while guaranteeing efficient investment by establishing three sets of rules:

  • strict prudential rules to protect the beneficiaries and members of IORPs, who must have sufficient information on the rules of the pension scheme, on the institution's financial situation and on their rights;
  • investment rules adapted to the characteristics of IORPs and to an efficient management of savings since IORPs invest on a long-term basis and have to diversify their assets by taking full advantage of the benefits offered by the single market and the euro. If each institution is to establish the safest and most efficient investment policy, the investment rules, and in particular the rules for investing in shares, must not be too restrictive;
  • rules permitting cross-border management of occupational pension schemes.

This cross-border management requires mutual recognition of supervisory methods in force in the Member States and must be supplemented by an appropriate degree of tax coordination.

This Directive does not concern the institutions covered by the Directive on life insurance and the Directive on Alternative Investment Fund Managers.

The European Insurance and Occupational Pensions Authority (EIOPA) is responsible for collecting the information communicated by Member States and for publishing such information on its website. The Authority must be informed of the cross-border activities of an IORP.

The EIOPA may develop draft implementing technical standards on the forms and formats for the documents necessary for the exercise of supervision. It cooperates closely with Member States and the Commission.

This Directive will help achieve the following aims:

  • Ensuring a high level of protection for members and beneficiaries of pension funds The Directive clearly sets out how IORPs should function. Members and beneficiaries are properly informed about the rules of the scheme, the financial situation of the institution in question and their rights. Commitments as to future benefits are carefully calculated and represented by sufficient assets on the balance sheet. Member States are urged to confer on their supervisory authorities the necessary powers to supervise their IORPs effectively. In order to improve the quality of the investments made by IORPs and thus to protect investors, amending Directive 2013/14/EU requires IORPs to avoid relying solely or mechanistically on credit ratings or using them as the only parameter when assessing the risk involved in the investments they make.
  • Allowing institutions to accept as members companies located in other Member States and to manage their pension schemes On the whole, occupational retirement providers operate only in the Member State in which they are based. Companies located in ten different Member States must therefore call on the services of ten different providers. For multinational companies, this could cost around EUR 40 million a year. Considerable economies of scale could be achieved if one IORP could manage all the different schemes of the same company doing business in several Member States. To this end, the Directive authorises mutual recognition of the supervisory schemes in force in Member States. An IORP can therefore manage the schemes of companies located in other Member States by applying the prudential rules of the Member State in which they are located (home-country control).The Directive nevertheless guarantees the continuing application of Member States' social and labour legislation (i.e. the legislation governing the relationship between sponsoring undertakings (which pay contributions into IORPs) and members).
  • Allowing IORPs to implement investment strategies suited to the characteristics of their pension schemes Given that IORPs invest on a very long-term basis, they need to be free to apply whatever investment policy is best suited to the commitments they have made. The Directive lays down a set of principles aimed at helping IORPs define their asset-allocation strategy in accordance with the prudent person rule. In accordance with this rule, assets should be invested in the best interests of members and always in a broadly diversified manner in order to ensure the portfolio's security, quality, liquidity and profitability. The Directive also lays down that investments in shares and capital investment should not be unduly restricted. However, Members States will be able to subject IORPs established under their jurisdiction to more detailed investment rules but must allow IORPs to invest at least 70 % of their technical provisions or their portfolio in shares and corporate bonds and at least 30 % in currencies other than that in which their future pension payments are expressed. Furthermore, the Directive allows the host Member State (where the company paying the contributions is based) to request the home Member State (where the retirement provision institution is located) to apply certain quantitative rules to assets held by cross-border pension schemes provided that the host Member State in question applies the same (or stricter) rules to its own funds. These quantitative rules govern investments in assets not admitted to trading on a regulated market, assets issued by the sponsoring undertaking and assets denominated in currencies other than that in which their future pension payments are expressed. Finally, Member States shall require IORPs an adequate available solvency margin at all times which is at least equal to the requirements in this Directive. The available solvency margin shall consist of the assets of the institution free of any foreseeable liabilities, less any intangible items. It is possible that one third of the required solvency margin shall constitute the guarantee fund (minimum EUR 3 million – this amount shall be revised every year).
  • Respecting Member States’ prerogatives regarding social protection and pension schemes The principle of subsidiarity lays down that it is for the Members States to organise social protection and pension schemes. The choice between pay-as-you-go or funding schemes, the balance that may need to be struck between these two types of scheme and the encouragement of certain types of retirement savings scheme are decisions left entirely to the Member States. Occupational retirement schemes based on the funding principle exist in most Member States, but they currently account for the bulk of retirement schemes available in Ireland, the Netherlands and the United Kingdom. The Directive in no way affects this national prerogative. It simply aims to allow the internal market to perform to its utmost, primarily in the interests of future pensioners, while fully respecting national prerogatives. A coherent Community framework strengthening the security and efficiency of IORPs and allowing them to benefit fully from the internal market and the euro will be a major asset for those Member States wishing to develop the role of occupational retirement schemes in their pension systems.


There are three main categories of pension scheme: social security schemes, individual schemes (life assurance contracts) and occupational schemes. IORPs cover some 25 % of the EU's working population and manage assets of EUR 2 500 billion, i.e. about 29 % of the Union's GDP. Thus, along with the other financial institutions, such as banks, insurance companies and UCITS, they play a key role in Europe's economy. They differ from other bodies by the very long-term nature of their activities. In view of the ageing of the Union's population, it is vital to ensure that IORPs can operate with maximum security and efficiency. Savers must also be protected by strict prudential rules, due attention being paid to the cost of pensions.

In this context, Directive 2003/41/EC has been adopted in order to lay down a prudential framework aimed at protecting future pensioners’ rights. With an integrated capital market and the introduction of the euro, it also helps remove barriers to investment on the part of pension and retirement funds.



Entry into force

Deadline for transposition in the Member States

Official Journal

Directive 2003/41/EC



OJ L 235, 23.9.2003

Amending act(s)

Entry into force

Deadline for transposition in the Member States

Official Journal

Directive 2009/138/EC



OJ L 335, 17.12.2009

Directive 2010/78/EU



OJ L 331, 15.12.2010

Directive 2011/61/EU



OJ L 174, 1.7.2011

Directive 2013/14/EU



OJ L 145 31.5.2013

The successive amendments and corrections to Directive 2003/41/EC have been incorporated into the basic text. This consolidated version is for reference only.


Report from the Commission of 30 April 2009 On some key aspects concerning Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision (IORP Directive) [ COM(2009) 203 final – Not published in the Official Journal].

This Report describes the application of the IORP Directive (Institutions for Occupational Retirement Provision) in the Member States, examining in particular the technical provisions and the adaptation of national supervisory systems.

The Report underlines the fact that IORPs in several Member States use different methods and assumptions to determine their technical provisions. The rules on the calculation of technical provisions from a cross-border perspective should be harmonised.

In order to facilitate the adaptation of national supervisory systems, the Budapest Protocol was established in February 2006. It defines provisions for supervision and exchange of information between home and host supervisory authorities of cross-border IORPs. Work carried out under this Protocol is considered as satisfactory.

Consequently, the Commission considers that it is not necessary to amend current IORP legislation.

Last updated: 12.03.2014