The European Insurance and Occupational Pensions Authority (Eiopa) concluded that better supervision of liquidity risk management across institutions for occupational retirement provision (IORPs) was necessary to preserve financial system stability and ensure pension schemes could meet their obligations. In an opinion published on Thursday 10 July 2025, Eiopa stated that national supervisors should strengthen their scrutiny of liquidity risk, especially where IORPs face material exposures.

Eiopa warned that liquidity shortfalls could arise from unexpected changes in cash flows, including declines in contributions or investment income, as well as increases in outflows such as early withdrawals. A particular area of concern was the use of derivatives for hedging interest rate or foreign currency exposures, which could trigger sudden margin and collateral calls if markets move sharply against IORPs’ positions.

Stress testing and liquidity buffers recommended

Eiopa instructed national supervisors to require that IORPs with significant liquidity risk integrate this risk into their broader risk management systems. According to the opinion, pension funds should conduct stress tests on incoming and outgoing cash flows and maintain sufficient buffers of liquid assets to address unexpected liquidity gaps.

While acknowledging the considerable differences among IORPs across member states, Eiopa expected national authorities to apply the opinion in a “risk-based and proportionate” manner. This approach aimed to ensure consistency without imposing undue burdens on pension schemes with minimal liquidity exposure.

Immediate application across the EU

The opinion took immediate effect and was directed at national competent authorities across the EU. Eiopa stated that its aim was to reinforce the financial soundness of IORPs and enhance the protection of pension fund members and beneficiaries throughout the European Union.