On 11 May 2015, the European Insurance and Occupational Pensions Authority (EIOPA) has launched its first stress test for Institutions for Occupational Retirement Provision (IORPs) and a quantitative assessment of further work on solvency of IORPs.
The stress test will assess the resilience of IORPs and their pension schemes to adverse market scenarios and a longevity scenario. The exercise will be conducted in seventeen European countries with material IORP sectors covering at least 50% of their national market.
The stress test covers both defined benefit schemes and defined contribution plans. The stress test will provide insight and raise awareness of the occupational pensions' sector risks and vulnerabilities. Potential transmission mechanisms of IORPs to the rest of the financial sector and the real economy will also be evaluated.
The quantitative assessment will gather data of IORPs on possible uses of the holistic balance sheet within an EU-wide supervisory framework. The outcome will support EIOPA in further developing its Advice to the European Commission on EU solvency rules for IORPs, which is expected to be delivered by March 2016.
The selection of the IORPs will be made by national supervisors. In order to minimise the burden on IORPs, the stress test and the quantitative assessment will be conducted in parallel until 10 August 2015. From the end of August to September, EIOPA will carry out a centralised quality assurance of all submissions and in December 2015 it will publish the results of the stress test analysis.
Occupational pension funds or Institutions for Occupational Retirement Provision are financial institutions which manage collective retirement schemes for employers in order to provide retirement benefits to their employees (the scheme members and beneficiaries).
Occupational pensions, which include an employer contribution, are known as the "second pillar" of pension systems, the "first pillar" being state-based social security pensions, and the "third pillar" being non-compulsory private pension savings by individuals.
There are some 125,000 such funds operating across the EU. They hold assets worth €2.5 trillion on behalf of around 75 million Europeans, which represents 20% of the EU’s working-age population.
For further information, please visit EIOPA’S occupational pensions stress test webpage and the quantitative assessment webpage.