European Commission plans to create a level playing field between pension funds and insurance companies by applying the same capital requirement rules to both sectors could damage economic growth, the European Federation for Retirement Provision has warned.
Applying the Solvency II rules being introduced for Europe's insurance industry to pensions could 'significantly harm' the future offering of workplace pensions, the body representing Europe's pension funds said in its response to the EC's February 2012 white paper on pension provision. This would, in turn, impact on the stability of the financial markets and ultimately growth and job creation, it said.
The potential for Solvency II-type rules to be applied to pensions has emerged as part of the Commission's revision of the European Union rules governing workplace pension provision, the Institutions for Occupational Retirement Provision Directive.
'The European Commission is likely to propose harmonised capital requirements for workplace pension funds, with a strong focus on a high level of short-term security,' EFRP explained.
'The regulatory framework would be based on the Solvency II framework for insurance companies and the holistic balance sheet. This proposal could significantly harm the future offering of occupational pensions.'
Instead, the Commission was urged to rethink the revision process 'with a view to pursuing the security of pensions from a comprehensive approach, focusing on adequacy and sustainability now and in the future'.
EFRP's reservations echo those expressed by other key pensions industry bodies such as the UK's National Association of Pension Funds. Last month the Labour Party warned that imposing Solvency II-type capital requirements on pension funds could push businesses into insolvency.
EFRP was more positive about the EC white paper's overall goal of achieving 'adequate, safe and sustainable' pensions and in particular welcomed the Commission's support for increased coverage of workplace pensions.
'We call on the EU to take a comprehensive approach to pensions, to create an enabling environment for work-related pensions, which already contribute to adequate pension benefit provision in some member states and can play a larger role.
'Equally, pension funds have an important stabilising role in the financial markets, which we believe should be preserved.'