The IOPS Principles and Guidelines of Private Pension Supervision focus on protecting the interests of pension fund members and beneficiaries, by promoting the stability, security and good governance of pension funds.
IOPS Principles of Private Pension Supervision
The IOPS Principles of Private Pension Supervision were approved by the governing members at the Annual General Meeting held in Istanbul in 2006. A methodology for authorities to undertake self-assessment against the Principles has also been developed. The Principles were revised in 2010. These Principles cover topics such as objectives, independence, adequacy of resources and powers, risk-orientation, proportionality and consistency, consultation and cooperation, confidentiality, transparency and governance. IOPS member authorities are widely adopting the IOPS Principles and using them as a basis for benchmarking and self-assessment. These Principles have also been incorporated into the OECD Core Principles of Private Pension Regulation and have been used by the IMF and the World Bank in the Financial Sector Assessment Programmes (FSAP). The IOPS Principles were also adopted by the International Association of Entities Supervising Pension Funds (AIOS).
IOPS Guidelines and Good Practices
In addition to the IOPS Principles of Private Pension Supervision, the following guidelines have been approved by the Governing Members. These guidelines and good practices are not legally binding instruments. However the Members are encouraged to observe and adopt them and identify the areas of weakness to bring the regulation and supervisory regimes and techniques in line with international standards:
- Supervisory guidelines on the integration of ESG factors in the investment and risk management of pension funds (2019):
This document, published on 22 October 2019, contains a set of guidelines on the integration of ESG factors in the area of supervision of pension fund investment and risk management. The guidelines encourage supervisory authorities to clarify that the explicit integration of ESG factors into pension fund investment and risk management process is in line with their fiduciary duties and propose also an enhanced disclosure of ESG factors by pension funds. These guidelines should be read in conjunction with the IOPS Principles of Private Pension Supervision and IOPS good practices on pension funds investment governance. They are voluntary in nature and are intended to guide regulators, supervisors, and other entities involved in supervision of pension risk management and investment. Therefore, the word “should” is to be interpreted as an encouragement to supervisory authorities to voluntarily adopt and implement them.
- IOPS Good Practices on the Role of Pension Supervisory Authorities in Consumer Protection Related to Private Pensions (2018):
These Good Practices offer guidance to Pension Supervisory Authorities on how to ensure effective consumer protection in the field of private pensions. The Good Practices focus on five key areas identified by the G20 High Level Principles (HLPs) and related Effective Approaches which are considered the most relevant from the pension supervisory perspective: HLP 2: Role of Oversight Bodies; HLP 4: Disclosure and Transparency; HLP 5: Financial Education and Awareness; HLP 6: Responsible Business Conduct and HLP 9: Complaints Handling and Redress.
- IOPS Good Practices for Governance of Pension Supervisory Authorities (2013):
Promoting good governance has been at the heart of on-going reform efforts in many countries in recent years. Adherence to good governance practices by private pension funds (and other financial institutions responsible for managing and administering private pensions) and also by public authorities involved in their regulation and supervision is essential for strengthening private pension systems and enhancing public confidence in the oversight process. Recognising the crucial importance of good governance for pension supervisory authorities as highlighted in the IOPS Principles of Private Pension Supervision, the IOPS has developed good practices as guidance for its Members and other pension supervisory authorities.
- OECD/IOPS Good Practices on Pension Funds' Use of Alternative Instruments and Derivatives (2011):
The OECD and the IOPS developed these good practices in view of the increasing use of alternative investments and derivatives by pension funds and the opportunities and risks they present to the security and safety of retirement benefits. The Good Practices reflect what pension regulatory and supervisory authorities usually expect to examine when assessing the risk management of pension funds that use alternative investments and derivatives. As such, the Good Practices may also help and encourage pension funds to improve their risk management practices and thereby use these instruments safely and effectively.
- OECD/IOPS Good Practices for Pension Funds’ Risk Management Systems (2011):
Good Practices aim to outline the main features of risk management systems which pension funds employ. They cover the role of management in the risk management process, look in more detail at investment risk, funding risk and operational risk (including outsourcing) control. The good practices also provide guidance for pension fund regulators and supervisors on how to check that such systems are operating effectively.
IOPS Good Practices in the Risk Management of Alternative Investments by Pension Funds (2010):
Directed at pension supervisory authorities to assist them in assessing whether pension funds are managing their alternative investments adequately. In particular, they focus on less liquid, less transparent, high-risk investment vehicles. The Good Practices are designed to assist such assessments in the context of a ‘principles-based’ approach to supervision.
- IOPS Guidelines for Supervisory Intervention, Enforcement and Sanctions (2009):
Covers the powers necessary for supervisory authorities to undertake preventive, protective or punitive interventions successfully, and provide directions to pension supervisors on how to develop a suitable enforcement approach in order to protect members and beneficiaries, maximise benefits and minimise costs.
- OECD/IOPS Guidelines on the Licensing of Pension Entities (2008):
The Guidelines promote effective and impartial licensing requirements and procedures, thus strengthening confidence in the pension system as well as its supervisory system. These Guidelines were approved by the OECD Council.
IOPS Guidelines for the Supervisory Assessment of Pension Funds (2008):
The purpose of these guidelines is to provide pension supervisors with general supervisory standards for the conduct of the supervisory process. It should be noted that these guidelines mainly focus on prudential supervision.