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
IOPS principles of private pension
supervision
• What is IOPS
• What IOPS is doing
• The diversity of pension supervision
• The common core principles
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.
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
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
Programme of Work
On-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
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
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)
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
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
Pension supervision structures are
diverse
• Relationship with pensions regulation
• Distance from Government
• Unitary or combined supervisors
Diversity Pension Supervisory Structures
Agency Supervising 2 Types
of Financial Intermediaries
Multiple
Supervisors
Argentina
Bahamas
Barbados
Botswana
Brazil
Bulgaria
China
Cyprus
Egypt
France
Greece
Hong Kong
India
Indonesia
Israel
Italy
Jordan
Lithuania
Netherlands
New Sealand
Panama
Philippines
Poland
Portugal
Russia
Slovenia
Sri Lanka
Spain
Thailand
Turkey
USA
Securities
firms and
insurers
Bolivia
Chile
Egypt
Mauritius
Slovakia
South Africa
Ukraine
Banks and
insurers
Australia
Belgium
Canada
Colimbia
Ecuador
El Salvador
Guatemala
Kazakhstan
Malaysia
Peru
Venezuela
Single
Supervisor
Banks and
securities
firms
Dominican Republic
Finland
Luxembourg
Mexico
Switzerland
Uruguay
Austria
Bahrain
Bermuda
Cayman Islands
Denmark
Estonia
Germany
Gibraltar
Hungary
Iceland
Ireland
Japan
Latvia
Maldives
Malta
Nicaragua
Norway
Singapore
South Korea
Sweden
UAE
UK
Source: de Luna and Rose (2003)
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
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
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
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 7:Consultation + 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