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Finland – Implementing IORP II

A new European pensions directive on the activities and supervision of institutions for occupational retirement provision (IORPs)), commonly known as ‘IORP II’, came into force in January 2017.  As with much of the financial sector legislation to emerge from the financial crisis of 2008, the directive aims to improve governance and accountability.

Provisions relating to IORP II were introduced into Finnish legislation from 1 January 2019.

While many of the new requirements are already covered by Finnish legislation, such as the requirements for the PBS, new provisions were needed in relation to cross-border transfers, investment and ESG matters, governance systems, and risk management and internal audit functions, among other things. These changes are expected to have a significant impact, given the increased workload and associated costs for IORPs.

Previously, there were no strict legal requirements requiring IORP assets to be invested in accordance with ESG principles, but IORPs could voluntarily adopt such policies. Now, there are greater information and administrative obligations for IORPS in this area.

DC IORPs will generally have to appoint a depositary. However, those that are not required to appoint a depositary, will be obliged to ensure that their financial instruments are properly managed and protected, keep account of the assets, and adopt measures to prevent any conflicts of interest.

Anyone involved in running IORPs are supervised by the Finnish Financial Supervisory Authority (FIN-FSA), which checks whether the fit and proper requirements are met.

The increased administrative burden for IORPs has been a cause for concern in Finland, with speculation that this is already leading to a decrease in the number of IORPs. Further legislative changes may be needed to address this.