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The Actuary The magazine of the Institute & Faculty of Actuaries

Barnier moves to dispel fears over ‘Solvency II for pensions’

The European Union internal markets commissioner Michael Barnier has moved to dispel concerns over how Solvency II-type rules will be applied to pensions.

Michael Barnier EU
European Union internal markets commissioner Michael Barnier Photo: EU

In a statement issued earlier this month, Mr Barnier said that, while the review of the Institutions for Occupational Retirement Provision, or IORP, Directive would be inspired by the Solvency II approach ‘when appropriate’ it would not ‘copy and paste’ the new insurance industry rules.

‘I want to maintain a level playing field within the Single Market. This means it is important that the same products and activities are subject to the same requirements, regardless of the structure of the providers,’ he said.

‘But it does not mean I will propose the extension of Solvency II as such to pension funds.’

Mr Barnier’s comments come against the backdrop of continued concern over the impact Solvency II-type rules could have on pension funds. Earlier this month, unions, pension funds and business leaders wrote to the president of the European Commission warning that such a move could damage Europe’s long-term economic growth.

By demanding dramatic increases to employers’ funding for schemes, the rules could drive businesses into insolvencies and increase job losses, they said.

But, in his statement, Mr Barnier said that while he had seen various estimates of the impact of Solvency II on pension funds, ‘these make no sense at all because we won’t copy and paste Solvency II into pension funds’.

He explained: ‘In no way do I want to take actions which could undermine the supply of occupational pension provision. We need pension funds to continue playing their role as long-term investors, as this is essential for long-term jobs and growth.’

Mr Barnier said he was ‘well aware’ that companies could not be asked to lock up capital in their pension funds when they needed access to finance to grow and compete. He also stressed the different features pension funds have one from EU member state to another. ‘I don’t want to penalise well functioning systems,’ he said.

‘That is why our review of the IORP Directive will be done in such a way that is supports Europe’s growth potential.’

He said the proposals he would make by the end of 2012 would be based on ‘in-depth impact assessments’. In particular, he said the quantitative impact study to be carried out by the European Insurance and Occupational Pensions Authority would be ‘essential’ in estimating the financial impact of various proposals.

Last week, EIOPA submitted its advice on the review of the IORP Directive to the commission, and Mr Barnier confirmed this would be discussed at a public hearing being held in Brussels on March 1.

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