The European Commission has been urged not to introduce new capital requirements for pension schemes which could limit the investment potential of funds.
MEPs passed a resolution last week warning the Commission that increasing capital adequacy requirements under the planned revision of the Institutions for Occupational Retirement Provision Directive could 'jeopardise' pension funds' 'important role' as long-term investors.
By raising the cost of pension provision they could also make it 'impossible' for businesses to provide workplace pensions, the MEPs on the European Parliament's employment and social affairs committee claimed. Their resolution is in response to a European Commission white paper on pension provision issued in February 2012, which set out proposed changes.
The author of the resolution, Dutch MEP Ria Oomen-Ruijten, warned that 'increased capital requirements raise costs, thus jeopardising the adequacy of the pensions of present and future pensions'.
She added: 'Stringent quantitative requirements also encroach upon the important role of pension funds as long-term investors in the European economy, and in this way damage economic growth and prevent job creation.'
It is 'undesirable' to revise the IORP directive in relation to quantitative requirements, but it could be revised to improve the transparency of investment strategies and level of costs, the resolution said.
The MEPs are the latest group to criticise the potential for the revision of IORP to include capital rules similar to those being introduced for the insurance industry under Solvency II.
In the resolution, they stress that pension schemes are concerned with a different type of risk to insurance products and are not designed to make a profit.
The resolution calls for the introduction of a multi-pillar approach to pensions, with the first formed by public pensions, the second comprising company and collective pensions and the third private savings.
Even in the face of low economic growth and fiscal consolidation, countries should safeguard public pensions that at least guarantee decent living standards, MEPs said.
They should also take account of rising life expectancy when setting retirement ages and the changing ratio between pensioners, the unemployed and people in work. Early retirement schemes should be phased out and people be given the chance to work beyond the legal retirement age.
Oomen-Ruitjen added: 'We need safe and sustainable pensions in all member states now and in the future. This is important for both young and old people. In the context of increases in longevity, declining birth rates and constraints on public finances, we are facing enormous challenges.
'We should act by safeguarding public pensions, encouraging longer working lives and improving and increasing contributions to supplementary pension schemes. EU coordination on pensions is necessary, particularly for the functioning of the internal market, the EU2020 strategy and the stability and growth pact.'
