Pension schemes and trustees have welcomed the news that EIOPA, the EU pensions regulator, is ending its work on a solvency-based funding regime for pensions.

The solvency-based funding regime has been one of the biggest threats to UK defined benefit (DB) schemes in recent years.
If implemented, the "holistic balance sheet" (HBS) would have significantly increased the total deficit of UK schemes.

Latest figures for the HBS show that the combined deficit would have increased to GBP 770million from GBP 253billion under the current UK regime.

The Pensions and Lifetime Savings Association (PLSA), which has campaigned against the concept, welcomed the news.
PLSA chief executive Joanne Segars said the decision marks an important development in the long-running debate about a solvency-based funding regime for pensions and is "good news" for pension schemes.

However, she said, the alternative put forward by EIOPA – a new reporting regime to run alongside existing regulation - would also cause unnecessary confusion.

"The report acknowledges this would add GBP 167million a year to costs," she said, "and we believe there are more pressing priorities for EIOPA to pursue such as extending workplace pension saving to the 60% of EU citizens who have no access to it at present."

The news that the HBS concept has not disappeared completely was also disappointing to Ian Bell, head of pensions at RSM - the international tax and auditing firm.

Describing the news as a "sting in the tail", Bell said: "This will mean that defined benefit schemes will need to calculate the elements of the Holistic Balance Sheet and include them in their annual reporting - the additional reporting and auditing costs of the EIOPA proposals to all but the smallest defined benefit schemes in the UK will be huge."

Francois Barker, head of pensions at Eversheds, said vigilance would be required in future: "Member states such as the UK, Germany, Ireland, the Netherlands and Belgium will need to remain vigilant to the threat of this coming back on the agenda in a few years' time," he said.

First published 21.04.2016

Lindsay.sharman@wilmingtonplc.com