IOPS Principles of private pension supervision

1. 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

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

3. 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.

4. 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

5. 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

6. 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

7. 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

8. 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)

9. 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

10. 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

11. Pension supervision structures are diverse • Relationship with pensions regulation • Distance from Government • Unitary or combined supervisors

12. Diversity Pension Supervisory Structures

13. 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

14. 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

15. 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

16. 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