UK pensions industry: "no case" for single European solvency rules

The NAPF, which represents the interests of the UK pension industry, said that the European Insurance and Occupational Pensions Authority (EIOPA) was pursuing a project that had "no mandate from the European Commission and has been widely opposed". EIOPA has been consulting on proposals for a 'holistic balance sheet' test which it would like to see included in the new Institutions for Occupational Retirement Provision (IORP) Directive.

Joanne Segars, NAPF chief executive, said that there were "far more pressing challenges that EIOPA should be addressing".

"By pursuing the holistic balance sheet project, EIOPA risks being left behind at a time when the rest of the pensions world has moved on," she said. "The new European Commission is focussing on encouraging long-term investment, the proposed IORP Directive aims to strengthen governance and communications, and the industry is working hard to deliver good value and high quality pensions."

"The NAPF recognises that EIOPA has responded to previous rounds of consultation by including options for principles-based approaches and more flexible implementation at a national level, which is welcome and we hope they will listen again. There is no case for a single, pan-EU system," she said.

The European Commission dropped plans to include more stringent solvency requirements for pension providers in the revised IORP Directive after protests from the pensions industry and national governments, particularly that of the UK. The original intention behind new solvency rules was to ensure a "level playing field" between pension funds and insurance companies, as well as to protect the pension savings of cross-border workers. Insurers sell pensions in various EU member states and will become subject to a new Solvency II standards regime from next year.

EIOPA has been undertaking further work on solvency "on its own initiative", which it will ultimately use to produce technical advice to the European Commission. However, the Commission is under no obligation to implement its recommendations. EIOPA's proposed 'holistic balance sheet' approach would require pension funds across Europe to meet similar solvency requirements regardless of the strength of the employer's covenant; or of whatever national security mechanisms, such as the UK's industry-funded Pension Protection Fund (PPF), are in place.

Although its response to the consultation was generally critical of EIOPA's proposals, the NAPF included a number of suggestions that it said would mitigate the impact of any new system. It said that the holistic balance sheet should be used as "a risk management tool, rather than as a new funding regime" and include a long transition period, as well as ensuring that it applied only to future accruals.