Regulatory Oversight

The methods of pension regulation and supervision differ across countries, reflecting individual national standards and structures. For example, some OECD countries have

established independent, separate pension fund supervisory agencies. Elsewhere, pension funds can fall under the insurance regulator, a universal financial services supervisor, or the ministry of finance. Nevertheless, despite country differences, there are broadly two models of supervision: proactive and reactive.

• Proactive supervision involves detailed specification of the activities of pension fund managers, as well as tight supervision and audit to enforce the rules.

• Reactive supervision allows for a greater degree of self-regulation within the sector.

Supervision can cover institutional controls (authorization and licensing of manag­ers and funds); financial tasks (e. g., ensuring financial reporting, valuing portfolios, and supervising restrictions on asset holdings); membership; and benefits controls (e. g., enrollment, marketing and transfer between funds, and monitoring the calculation of entitlements).

Concern over insufficient regulatory attention to solvency and risk management issues has directed focus on greater risk-based supervision and on greater attention to asset – liability management by pension funds. For example, several pension guarantee funds take portfolio risks into account when establishing premiums. In some countries, risk-based capital or funding requirements have been introduced into the pension system.6 The OECD Core Principles of Occupational Pension Regulation propose principles related to the full funding of pension schemes and the enhancement of portability.

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