IOPS Principles of private pension supervision

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IOPS Principles of private pension supervision

• John Ashcroft
• President, IOPS
• Head of Strategy, UK Pensions Regulator
• Supervision of Pension Systems
• Current Trends and Issues
• Warsaw 17-19 September 2006

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IOPS principles of private pension supervision

• What is IOPS
• What IOPS is doing
• The diversity of pension supervision
• The common core principles

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What is IOPS

• The International Organisation of Pension
  Supervisors (IOPS)
• An independent international body formed in 2004,
  representing those involved in the supervision of
  private pension arrangements.
• Currently has around 50 members and observers,
  representing over 40 countries worldwide - from
  Australia to Zambia
• Covering all levels of economic development and
  bringing together all types of pension and
  supervisory systems.

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IOPS Goals

• Serving as the standard-setting body on pension
  supervisory matters
• Promoting international co-operation on pension
  supervision
• Providing a worldwide forum for policy dialogue
  and exchange of information on pension
  supervision
• Participating in the work of relevant
  international bodies in the area of pensions,
  including joint research and activities to
  improve statistical collection and analysis

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Programme of Work Key Projects

• Risk-based supervision
• Joint with World Bank first project designed to
  provide a comprehensive source of information on
  the motivations, practices and outcomes of
  risk-based methods used by private pension
  supervisors.
• World Bank case studies on Australia,
  Netherlands, Denmark, Chile, Mexico
• IOPS case studies on South Africa, Croatia,
  Kenya, UK, Germany
• IOPS Principles Private Pension Supervision
• Approved by Governing Membership in December 2005
• Open for consultation until May 2006

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Programme of WorkOn-going Projects

• Supervisory education, including training of
  trustees- Kenya, Ireland, South Africa, United
  Kingdom, World Bank
• Guidelines for compliance with the licensing of
  pension funds- Australia, Germany - joint work
  with the OECD
• Cross-border pension supervision- Spain,
  Hungary, UK, Luxembourg
• Utilisation of IT technology in off-site
  supervision- Turkey
• Analysis of supervisory structures
• - Mexico
• Information for members of DC schemes
• - Italy, Germany, Hungary

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Cooperation with other organisations

• Partnership agreements
• OECD
• ISSA
• IAIS (pending)
• Associate Members and Observers
• IAA
• IMF
• World Bank
• Cooperation with regional supervisory bodies
• AIOS
• CEIOPS

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Conference Schedule

• First Annual General Meeting held December 2005
• Bylaws amended
• Principles approved for consultation
• New Executive Committee elected
• Australia / Chile / China / Germany Hungary /
  Italy / Jordan / Kenya / Pakistan / UK /
  Netherlands
• 2005 Regional conference held in Bangkok,
  Thailand
• 12 Asian countries represented
• 100 global delegates in total
• 2006 Regional conference held in Santiago, Chile
• 11 Latin American countries represented
• 150 global delegates in total (33 countries)

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2006/ 2007 Information

• Meeting Schedule
• November 6-8th 2006 Istanbul, Turkey
• IOPS committee meetings AGM, OECD/ IOPS
  Pensions Global Forum
• March 21-23rd 2007 Amsterdam, the Netherlands
• IOPS committee meetings DNB Pensions
  Conference
• June 1st 2007 Basel, Switzerland
• IOPS committee meetings
• November 2007, Beijing, China
• IOPS committee meetings AGM, OECD/ IOPS
  Pensions Global Forum
• Annual fees
• 7,500 5,000 2,500
• www.iopsweb.org

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Diversity of supervised markets

• DB or DC or both
• Mature or developing market
• Employer or Government policy driven
• Trust-based or financial entities
• Relationship with insurance products
• Large or small numbers of schemes and plans

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Pension supervision structures are diverse

• Relationship with pensions regulation
• Distance from Government
• Unitary or combined supervisors

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Diversity Pension Supervisory Structures
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There are diverse supervision models

• Market regulation
• Conduct of business
• Prudential
• Different supervision paradigms
• Transactional focus on influencing activities
• Structural focus on supervising the entities
• Risk-based approaches
• Quantitative sophistication
• Prioritisation of interventions
• Increased emphasis on education

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But there are many common challenges

• Integration of financial markets and supervision
  structures
• Globalisation
• Increasing longevity
• The low interest rate environment
• Adapting to new financial products and
  transactions Accommodating diversity and
  individual choice
• Transition from investment in public debt
• Enhancing corporate governance
• Expanding coverage of informal sector and
  portability
• Developing and supervising the pay out phase
• Concerns about regulatory burdens
• Moving to a risk-based approach

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IOPS Principles of Private Pension Supervision

• Principle 1 Objective
• National Laws should assign clear and explicit
  objectives to pension supervisory authorities
• Principle 2 Independence
• Pension supervisory authorities should have
  operational independence
• Principle 3 Adequate Resources
• Pension supervisory authorities require adequate
  financial, human and other resources
• Principle 4 Adequate Powers
• Pension Supervisory authorities should be endowed
  with the necessary investigatory and enforcement
  power to fulfil functions and achieve their
  objectives
• Principle 5 Risk Orientation
• Pension supervision should seek to mitigate the
  greatest potential risks to the pension system

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IOPS Principles of Private Pension Supervision

• Principle 6 Proportionality Consistency
• Pension supervisory authorities should ensure
  that investigatory and enforcement requirements
  are proportional to the risks being mitigated and
  that their actions are consistent
• Principle 7Consultation Cooperation
• Pension supervisory authorities should consult
  with the bodies they are overseeing and cooperate
  with other supervisory authorities
• Principle 8 Confidentiality
• Pension supervisory authorities should treat
  confidential information appropriately
• Principle 9 Transparency
• Pension supervisory authorities should conduct
  their operations in a transparent manner
• Principle 10 Governance
• The supervisory authority should adhere to its
  own governance code and should be accountable