The European Insurance and Occupational Pensions Authority (EIOPA) has published its final report on the quantitative impact study (QIS) on Institutions for Occupational Retirement Provision (IORPs).
Within the report, the European pensions authority confirmed that solvency II-type proposals would increase UK pension fund deficits by around £150bn to at least £450bn.
The European Commission's decision to postpone the solvency rules for IORPs has been welcomed by many in the industry.
EIOPA's chair Gabriel Bernardino said: "This first QIS is an important step in developing a better understanding of the financial position of EU pensions.
"The ability of many IORPs to provide benefits is under significant pressure as a result of historically low interest rates, market volatility, improving longevity as well as economic pressure on participants and sponsoring employers.
"The holistic balance sheet which underlies this QIS is an opportunity to develop a risk based measurement of all of the elements which affect the cost of providing benefits as well as all mechanisms which fund those benefits or contribute to their security."
EIOPA admitted that further technical work is needed. The authority also said that it has published a discussion paper to improve the technical specifications for the valuation of sponsor support.
Regarding the finding that the solvency II-type proposals would increase UK pension fund deficits, the National Association of Pension Funds (NAPF) lead EU policy adviser James Walsh said: "This is final confirmation from the EU's own advisers that Solvency II-type rules would inflict an unpalatable and unnecessary blow on UK pensions.
"It is a relief that Commissioner Barnier has postponed these plans for now, but this report underlines the need for them to be scrapped completely. They must not be revived by the next European Commission."
Walsh argued that EU policymakers should consider what the real priorities should be for pensions. He added: "Pension funds continue to support the EC's vision of 'safe, adequate and sustainable' pensions. We need a clear view of the features that would enable pension schemes to deliver on those objectives."
The sponsor support discussion paper focuses on the methodologies that can be used to determine the level of sponsor support for occupational schemes.
Commenting on the sponsor support discussion paper, Aon Hewitt partner Martin Lowes said: "It is reassuring that EIOPA and the European Commission have listened and - for the time being at least - have abandoned plans for new solvency requirements. More than anything, we are relieved that commonsense has prevailed."
He added: "European Commissioner Barnier has admitted the need for the EC to deepen its knowledge before taking any new decisions in this area, and EIOPA's discussion paper is a welcome contribution to this learning process.
"What we need to see now is the EC and EIOPA working with European pension funds and their sponsors to gain a full understanding of this complex issue of sponsor support."
First published 04.07.2013
monique_simpson@wilmington.co.uk
