The worst aspects of Solvency II have been avoided, but proportionate legislation for pensions is the next big issue for the European Commission (EC), Aon Hewitt has said.
The organisation said that there are still issues, even though the most damaging aspects of Solvency II for schemes have been avoided.
The most pressing of these issues is the need for proportionality in the future regime, to make legislation that is as appropriate for small schemes as it is for big schemes, Aon Hewitt said.
"It's tempting in the light of the 'triumph' of keeping the worst aspects of Solvency II out of legislation to think that the battle is won," said Aon Hewitt partner Kevin Wesbroom.
He added: "But this isn't the time for the industry to sit back – if anything it's a case of 'once more into the breach, dear friends'! The idea that UK schemes will be asked to pay a levy to continue work on these proposals suggests that the EC is still not in its best listening mode."
The EC confirmed that it plans to go ahead with its proposals to extend the Solvency II pillar 2 requirements to pensions schemes, which relate to governance and risk management, and also the Pillar 3 requirements, which relate to standardised disclosures to supervisors and to members.
Wesbroom said that there are some "very good and powerful parts" in the risk management framework that codify the way good schemes already manage their affairs, and that this would be the European equivalent of the Complete Financial Management plans that The Pensions Regulator (TPR) has talked about.
"However," said Wesbroom, "from the standpoint of UK schemes, the big issue is whether the EC can draft legislation which is genuinely proportionate - as suitable for the £50m scheme as for the one worth £5bn.
"There are plenty of lightly resourced UK schemes in the small to medium end of the market - and we have to keep up the fight to ensure that they are subject to the right legislation.
"Governance of the vast swathe of small to mid-sized schemes that are a feature of the UK pensions landscape will be a significant regulatory challenge in the years ahead for both UK and European regulators."
First published 06.06.2013
monique_simpson@wilmington.co.uk
