European pension regulation reform needs to find an adequate balance between security and affordability, according to the chairman of the European Insurance and Occupational Pensions Authority.

Gabriel Bernardino said using liability valuations and risk assessments that 'deny' market reality could not continue. Failing to reflect the true risk stakeholders are facing perpetuates the continued existence of 'clearly unsustainable' schemes, he said.
Speaking in London last week, he said that: 'The inevitable consequences in the short to medium term will be a sudden lowering in the value of pensions for the members and beneficiaries, higher concentration of costs for employers and ultimately intergenerational conflicts.'
Mr Bernardino said EIOPA's proposed use of a holistic balance sheet to detail schemes' assets and liabilities had the potential to ensure 'further transparency' on schemes' solvency. But, he said that the model would have to be tested.
He also stressed that 'in regulation, one size does not fit all'. 'In fact, different sectors have different business models and consequently different risks', he said, citing systemic risk as an example of this.
In terms of the impact of Solvency II regulation on the insurance market, Mr Bernardino acknowledged that rules would bring 'some level' of volatility to funds because it was grounded on an economic-based valuation of assets and liabilities and a total balance sheet approach to resources and risks.
But, he added, this volatility could be mitigated - especially for illiquid liabilities like annuities and pensions - by adjusting the relevant 'risk-free' rate used to discount the liabilities.
He added: 'If we want to reinforce consumer protection it is fundamental to preserve the basis of Solvency II as a sound framework for risk based supervision, giving the appropriate incentives to better risk management and enhancing transparency,' he said. 'Appropriate consideration' would however, be given to the transition periods needed for existing business, he added.
Mr Bernardino also said that, while EIOPA was committed to convergence of supervisory practices across Europe, this 'does not mean harmonisation'.
'The process of convergence should encompass the issuance of guidelines and recommendations on the common framework for the supervisory review process and the development of best practices in the different supervisory areas,' he said.
'Importantly this should leave sufficient flexibility to judgement by national supervisors,' he added.