The approach being used to test proposals for a new European Union regulatory system for workplace pension schemes is seriously flawed, according to the National Association of Pension Funds.
The European Insurance and Occupational Pensions Authority launched a quantitative impact study on the plans in October, working with nine countries including the UK to assess the potential impact of how it proposes to revise the EU Institutions for Occupational Retirement Provision Directive.
However, the NAPF today criticised the impact study, claiming the eight-week timetable - which ends today - as 'far too tight' to allow adequate consideration of the very complex issues in question. Many of its 1,300 pension scheme members said they did not have time to respond and some said it was too expensive for them to do so. The NAPF cited one scheme which would have faced a £15,000 bill to commission consultants to run the calculations required to give feedback on the plans.
Under the European Commission plans being tested by the impact study, pension schemes would use a 'holistic balance sheet' to value all aspects of their financial situation, including assets, liabilities and the employer's ability to support the scheme.
According to the NAPF, its members are concerned this approach is not a sound analytical framework for assessing the strength of pension schemes because it does not properly take into account the way larger companies in particular support their pension schemes.
Joanne Segars, NAPF chief executive, said: 'This study was a good opportunity to test the EU's proposals, but it has completely failed to do so.
'The holistic balance sheet does not take into account the complex structures of today's companies and pension schemes. Valuing an employer's covenant is a new and challenging task, and we need further work to find the correct way to do this.
'Pension schemes were given far too little time to carry out complex calculations, and the costs involved in running them were high. This has stopped many pension schemes from giving feedback.'
The NAPF also reiterated its concerns over how the proposed new system would measure the solvency and capital requirements of pension schemes, and whether this would be too similar to those being introduced for the insurance industry under Solvency II.
Segars explained: 'A new directive based on a Solvency II regime would have serious consequences for UK pensions and businesses. Imposing extra costs on pension schemes would force more of them to close, and could undermine jobs and investment at a time when the economy is struggling. The stakes are too high and we cannot rush things through.'
Last week, the CBI claimed the transposition of Solvency II-type rules to the pensions industry could cost UK businesses an extra £350bn.
Segars added: 'The European Commission must rethink its approach. It is time to put the brakes on and it is clear that the commission's proposals need much more thorough testing.'
Under the current schedule for revising the IORP Directive, EIOPA is set to submit the results of the impact study to the European Commission early next year, paving the way for a legislative proposal to be published in the summer.
