EIOPA Solvency II advice leaves glimmer of hope for UK

But despite advising the reforms go ahead largely unchanged as things stand, the European Insurance & Occupational Pensions Authority (EIOPA) has also left the door open for the European Commission to scrap its plans, if they can be proven to be significantly damaging to member-state economies.

The EIOPA final advice on the Institutions for Occupational Retirement Provision (IORP) directive has included a proposal it carries out its own quantitative study of the likely result of the reforms, in concurrence with the commission’s own impact assessment.

However, as pensionsweek.com first revealed (14/02/12), it also came out strongly in support of the “holistic balance sheet” principle, including unpopular measures like insurance-style tiers of assets – requiring greater sponsor cash commitments for growth-seeking portfolios – and a new discount rate likely to increase scheme liabilities.

National Association of Pension Funds chief executive Joanne Segars said: “We are disappointed that Europe’s pensions and insurance regulator is still proposing Solvency II-type rules for pension schemes, even though its own advice now acknowledges the damage that would be done to European pensions, jobs and the wider economy.

“Our initial assessment shows these rules could cost UK pension funds at least an extra £300bn. Faced with extra funding demands, many companies would have no choice other than to close their final salary pension schemes. 

“We are pleased EIOPA has heeded our advice on the fundamental role of the forthcoming quantitative impact study in assessing the impact of its proposals on pensions and the wider economy, and that it has made its recommendations conditional on the results.”

And Confederation of British Industry head of pensions policy Jim Bligh added: “Businesses are seriously concerned by EIOPA’s support for a Solvency II-style tiering of assets, which would carry significant economic risks, with firms struggling to raise capital from markets, and infrastructure funding being compromised.

“The commission must now address these concerns and carry out a thorough impact assessment. We are pleased EIOPA has set out that this is necessary.”

Meanwhile, as also first revealed in PW, the European Commission has suggested a partial climbdown on Solvency II could be on the cards, when legislation coming from the body's white paper (see box) is finalised.

It's spokesman for internal markets Michael Barnier has said: "To be clear: I have never said or suggested that pension funds should be subject to exactly the same rules as Solvency II.

"In no way do I want to take actions which could undermine the supply of occupational pension provision.

"I am well aware we cannot ask companies in the EU, notably SMEs, to lock up capital in their pension funds. Companies need access to finance to grow and compete in global markets."