The European Insurance and Occupational Pensions Authority’s insistence on pushing through a solvency system for defined benefit pensions comes at the worst possible time for UK providers planning for the UK’s own retirement reforms, experts told FTAdviser.
In its response today to Eiopa’s consultation on the IORP Directive, the industry body’s chief executive Joanne Segars stated that she was “very disappointed” by continued work on the holistic balance sheet project.
Under the holistic balance sheet approach, DB scheme assets would include both the financial and contingent assets, plus the sponsor’s covenant, while the liabilities would include the best estimate, a risk buffer and a surplus item where assets exceeded liabilities.
Ms Segars said: “It has no mandate from the European Commission and has been widely opposed, Eiopa risks being left behind at a time when the rest of the pensions world has moved on... there are far more pressing challenges that it should be addressing.”
Alan Higham, retirement director at Fidelity Worldwide Investment, told FTAdviser that the pace and weight of reform is incessant.
“There is definitely need for a pause, a moratorium on new regulation and legislation, we’ve got a lot of DB pension scheme clients that are under pressure, so I’d question whether now is the time for this latest round of European work.”
The final stage of consultation began in December and is due to conclude on 2 March, with Eiopa chairman Gabriel Bernardino stating: “We need to continue our common efforts in order to achieve a level playing field and a convergent level of policyholder protection.”
The Napf recognised that during previous rounds of consultation Eiopa had included options for principles-based approaches and more flexible implementation at a national level, holding out hope that such concessions could be made again and adding that “there is no case for a single, pan-EU system”.
Mr Higham explained that the main concern is that the same stringent solvency requirements applied to insurance companies across the EU will be brought in for UK DB pension schemes, exposing “huge” deficit black holes that will dent confidence in the company sponsors.
“This would create a crisis in confidence as companies would be forced to plug the holes with money better spent elsewhere, while also increasing pressure to close schemes to new members and future accrual, spelling the end of DB schemes altogether.”
Jonathan de Beer, assistant director for prudential regulation at the Association of British Insurers, told FTAdvier that while the trade body “strongly supports” the European Commission’s decision to maintain the existing capital rules for IORPs, any “unnecessary changes could add a considerable burden to schemes and have a wider impact on investment, jobs and growth throughout the EU”.
peter.walker@ft.com
