Alternative investments are explicitly the focus of a possible reform of the IORP II Directive. The aim is to overcome the fragmented internal market for occupational pensions and to channel the capital of pension institutions more towards long-term investments such as private equity, infrastructure, private debt and real estate.
On 8 September 2025, at the request of the EU Commission, the European supervisory authority EIOPA presented technical input on the adaptation of EU Directive 2016/2341 on the activities and supervision of occupational retirement provision (IORP II Directive). The input is part of the development of the “Savings and Investments Union (SIU)” strategy and contains a whole bundle of reform proposals.
What are pension schemes?
It is about the institutions for occupational retirement provision (IORPs).
For IORPs, the IORP II Directive is the central EU set of rules. Unlike insurers, IORPs are not primarily for-profit, but manage retirement plans for employees.
In Germany, this includes, in particular, -regulated institutions:
- Pension funds (§§ 232 et seq.)
- Pension funds (§§ 236 et seq.)
To put it very simply, pension funds are organised in a more insurance-like manner. They make stable, usually less profitable performance promises and are characterized by a strong safety orientation.
Pension funds, on the other hand, can be described as similar to investment funds . They are only subject to quantitative investment regulations to a limited extent and can therefore act in a more capital market-oriented manner and could also pursue higher alternative quotas .
Regulation of IORPs
IORPs are not governed by the Solvency II Directive for insurers, but by the IORP II Directive , an independent, principle-based supervisory framework.
Since IORPs service long-term obligations and, in the case of pension funds, the employer is liable for deficits, the legislature waives hard capital requirements.
Instead, the system logic of the IORP II Directive rests on a triangle of flexibility, governance and transparency:
- flexibility through the waiver of capital requirements,
- Governance through organisational, key functions and risk management requirements,
- Transparency through comprehensive information obligations towards supervisory authorities and members.
Fragmented internal market
The IORP II Directive does not contain any EU-wide quotas or limits for asset classes – not even for alternative investments.
Implementation in the Member States is therefore very heterogeneous.
EIOPA has empirically determined this in an Annex on quantitative investment limits in supplement to the IORP II’s Prudent Person Rule :
- Some member states consistently follow the Prudent Person Principle (PPP) and do not use quotas.
- 17 Member States , on the other hand, use formal investment quotas.
- In Germany, for example, the Investment Ordinance (AnlV) applies to pension funds with detailed quotas.
This fragmentation is an obstacle to a genuine internal market. In several Member States, national limits make it difficult for IORPs to invest in high-yielding, long-term alternatives investments.
EIOPA’s reform proposals
Today, Art. 19 IORP II allows Member States to impose national investment restrictions .
Many have made use of this (see above) – the result is a patchwork of restrictive regulations that, according to EIOPA, hinders IORPs from accessing alternatives, even though they have the long-term risk-bearing capacity to do so.
EIOPA therefore outlines two reform options for Art. 19 IORP II in Section 1 of document EIOPA-BoS-25/418:
Option 1: Completely switch to risk-based Prudent Person rule
- Investments (including in alternatives) only if IORPs can fully understand, measure, manage, control and report on their risks
- Member States may no longer impose blanket investment bans
- Exception: in the case of “DC schemes” (defined contribution commitments in which the capital market risk lies with the member), Member States may continue to set certain protection requirements
- Consequence:
- abolition of national quotas, such as the abolition of national quotas, such as the abolition of national quotas, such as the abolition of national quotas, as in the case of pension funds, which would probably continue to be permitted in accordance with the AnlV due to the risk of the member
- Maximum flexibility, but massively increased requirements for risk management, ORA and governance
Option 2: Clear permission for alternatives, but retaining national quotas
- Explicit permission to invest in alternatives
- Member States may continue to set general risk limits or quotas
- Consequence:
- IORPs will receive a securitised EU right to access alternatives,
- however, national quotas (e.g. AnlV in Germany) can in principle continue to exist
⚠️ Important: Both options are only suggestions, not recommendations.
EIOPA underlines that no impact assessment has been carried out . The EU Commission itself is to assess the feasibility and effectiveness .
Results and classification
- Flexibility in investment behaviour is a key element that distinguishes IORPs from Solvency II insurers.
- This flexibility is used differently across Member States, from very liberal PPP approaches to rigid quotas.
- As a result, alternative investments are treated very unequally and are considered politically underused within the framework of the planned Savings and Investments Union (SIU).
- The EIOPA proposals have not yet been decided; the reform process is only at the beginning and must be followed closely.
