The European Insurance and Occupational Pensions Authority has said it will look again at its controversial plans to introduce new funding requirements for pension schemes.
But, the regulator said it would not discuss the 'appropriateness and impact' of the 'holistic balance sheet' approach until further studies on how this Europe-wide funding standard would work in practice were completed.
The holistic balance sheet takes into account all aspects of a scheme's financial situation, including assets, liabilities and the employer's ability to support the scheme. It is part of a revision of the Institutions for Occupational Retirement Provision Directive that has already raised concerns among both the pensions industry and politicians over the impact it might have on schemes and the companies that fund them.
Yesterday, EIOPA submitted draft technical specifications to the European Commission outlining how it plans to carry out a quantitative impact study (QIS) on the holistic balance sheet. This is expected to start next week and continue until mid-December. The advice was accompanied by responses to the consultation launched in June on the planned methodology for the study.
EIOPA revealed that a 'large majority' of the 117 respondents to this consultation had 'raised concerns with regard to the approach to revising the IORP Directive itself, the process and the set up of the impact study exercise and the exhaustiveness of the technical specifications'.
In particular, respondents believed 'the new approach will jeopardise occupational pension provision and will have further economic, financial and social repercussions'.
The holistic balance sheet would lead to a 'strong increase' in funding requirements as well as raising schemes' administrative burden.
Respondents also described the timescale being used for the revision as 'too constrained', and said more impact studies were needed before the Commission presented its legislative proposals.
According to EIOPA, they also said it was 'unclear whether the holistic balance sheet approach is employed in the QIS exercise for supervisory, disclosure or internal model purposes.'
In its response, EIOPA acknowledged that there were still a number of issues that needed to be resolved in relation to the holistic balance sheet proposals, such as the potential responses the supervisory authorities could make.
But, it said: 'EIOPA would prefer deferring the discussion on the impact and appropriateness of the holistic balance sheet proposal until after the QIS and the Commission's impact assessment when a greater amount of relevant information is available.
'At that stage, EIOPA will also consider to offer further views with regard to its advice in the area of capital requirements and valuation.'
Criticism of the methodology came from Jonathan Camfield, partner at LCP, who said the draft advice on the technical specification published yesterday was 'as flawed as we feared it might be'.
'It's very complex, and attempts to put a value on a company's financial strength in a mechanistic way. This will result in meaningless figures for many companies who support pension schemes.
'It seems that the path towards IORP 2 pensions reform ? which could have a catastrophic impact on UK pensions ? is unrelenting. We can only hope that Europe realises that trying to shoehorn pension schemes into a one-size-fits-all regime like this will create widespread anomalies and be unnecessarily destructive for pension schemes and their sponsoring employers,' he added.
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