OECD Recommendations on Pensions Discourage ESOPs

In a draft for comments, the Organization for Economic Co-operation and Development's Council on the Core Principles of Private Pension Regulation suggested limits on company stock in pension plans. Their recommendation 4.16 states, "Investment in the assets of the plan sponsor, in parties related or affiliated with the governing body of pension fund, the pension entity or pension fund management company should be prohibited or strictly limited to a prudent level so as to ensure diversification (e.g. 5 percent of the pension fund assets) or otherwise avoid undue risks or costs to members." The draft is open for comments until October 20.