The European Insurance and Occupational Pensions Authority (EIOPA) has published a preliminary report on the impact of the proposed European Pensions Directive based on Solvency II-type rules, but emphasised that "analysis and further consideration" are needed for the final report.

The final report is due in mid-2013, but EIOPA said that the outcome of the quantitative impact study (QIS) must be treated with caution due to a number of unresolved issues, and that more studies may be needed in the future.

Even so, concerns have been expressed about some of EIOPA's preliminary findings, including the information that new European Union (EU) proposals could increase UK pension fund deficits to approximately £450bn, and some within the industry are calling for the European Commission to rethink its proposals.

Commenting on the preliminary report, Joanne Segars, The National Association of Pensions Funds (NAPF) chief executive, said: "The EU plans for UK pensions come with a clear and unpalatable price tag.

"Businesses trying to run final salary pension could be faced with bigger pensions bills to pug an astonishing £450bn funding gap. This would have a highly damaging effect for the retirement prospects of millions of UK workers."

Segars continued: "This project has been conducted at breakneck speed due to the Commission's ludicrously tight timetable. This cannot be the basis for formulating a policy that could undermine the retirement plans of millions of people both in the UK and across Europe.

"The European Commission needs to rethink its proposals, instead of trying to hurry them through."

Others have also voiced concerns regarding the European Commission's proposals.

Neil Carberry, CBI director for employment and skills, said: "The European Commission must not ignore this warning. EIOPA's preliminary results show the impact of these proposals are even worse than expected.

"An additional £450bn cash call on businesses would damage growth and job creation, as well as destabilising financial markets."

EIOPA said in the report that although the QIS provides insight into the workings of the holistic balance sheet, the outcome of this QIS should be treated with caution, because a number of issues had not been resolved yet.

IORP said in the preliminary report: "The reported values for the balance sheet items and capital requirements should be recognised as rough estimates surrounded by a lot of uncertainty that are dependent on the use of the holistic balance in practice and the accompanying supervisory responses."

Within the 78-page document, EIOPA also recognised that a "substantial" number of Institutions for Occupational Retirement Provision (IORPs) have expressed concern that the holistic balance sheet approach could result in a further closure of defined benefit (DB) schemes and move towards defined contribution (DC).

First published 10.04.2013

monique_simpson@wilmington.co.uk