OECD governments have agreed on six Core Principles of Occupational Pension Regulation in an effort to make regulation and management of company pension schemes more efficient.
The OECD says that it is introducing these principles because of the risks that pensions face. It warns that many company pension funds are currently at risk from volatile stock markets, and the growth of defined contributions schemes is shifting responsibility to employees, who may not be equipped to face related risks.
To reduce this risk, the OECD is inviting governments to encourage implementation of the six principles. Based on work developed in co-operation with the International Network of Pension Regulators and Supervisors, the Principles cover topics from the funding of company pension arrangements to protection of the rights of beneficiaries. The OECD is also working on other pension-related issues such as pension fund governance and financial education.
The core principles cover:
- conditions for effective regulation and supervision;
- establishment of pension plans, pension funds, and pension fund managing companies;
- pension plan liabilities, funding rules, winding up, and insurance;
- asset management;
- rights of members and beneficiaries and adequacy of benefits; and
- supervision.
The principles recommend that companies should aim to ensure that the assets of their pension funds fully cover potential liabilities, and that companies should create separate legal entities for their pension funds;.