EU Parliament Rejects 2% Venture Capital Rule for Pension Funds

The European Parliament has rejected a plan to force pension funds with more than €1bn under management to allocate 2% of their assets to venture capital. The decision appears in a draft text of Parliament's negotiating position on the IORP II review, circulating this week.

The rejected proposal came from rapporteur Damian Boeselager, a member of the European Parliament. His plan would have created a direct pipeline from pension capital into European start-ups. MEPs did not back it.

What does Parliament support instead?

Parliament is set to align with the European Commission on one contentious point: a ban on national quantitative limits. The Commission wants to stop member states from imposing limits on how much pension funds in their countries can invest in different asset classes.

These national limits often exist to keep pension capital out of high-risk or illiquid assets. The Commission wants them removed. Its stated goal is to push more money into innovative areas of the European economy.

The European Council has taken the opposite side. In its own negotiating position, signed off in June, the Council confirmed it would fight to protect member states' right to set such limits. That sets up a three-way fight, with Parliament and the Commission on one side and the Council on the other.

The draft also maintains a clause requiring pension funds to consider the sustainability preferences of their members when designing investment policies and strategies.

Where does Parliament oppose the Commission?

Parliament has removed several elements of the Commission's legislative proposal that would expand the role of the European Insurance and Occupational Pensions Authority (EIOPA).

The stripped-out provisions include EIOPA's expanded remit to set guidelines for pension funds. One deleted element would have had EIOPA develop a template to standardise the disclosure of pension benefit statements across the bloc. Parliament's draft cuts these powers back.

The pattern is consistent: Parliament backs deregulation of national investment limits but resists handing more supervisory authority to an EU-level regulator.

What happens next?

The timeline is set. This week's draft is expected to form the basis of Parliament's final negotiating position. A committee vote is scheduled for 10 November to sign it off. Approval by the wider Parliament will follow shortly afterwards.

Trilogues — the three-party negotiations between Parliament, Council and Commission — are expected to commence in January.

The Council's stated determination to defend national limits means the asset-class question will likely become the central battleground of those talks. If Parliament and the Commission hold their alignment, member states could lose a regulatory tool they have used to control pension fund risk for decades, and the Commission would gain its channel for steering pension capital toward Europe's innovative economy — without the mandatory 2% VC quota that Boeselager proposed.