Employers, pension savers and taxpayers could be made to finance the European pensions and insurance supervisory body under plans being considered by the European Parliament, Towers Watson warned today
A draft report, published by the Parliament's Committee on Economic and Monetary Affairs (ECON), recommended granting the European Insurance and Occupational Pensions Authority an independent budget. This would be funded by the contributions from 'market participants' and the 'Union budget', said Towers Watson.
Dave Roberts, a consultant at the firm said: '"Market participants" is code for pension schemes and insurance companies, while "the Union budget" means taxpayers.
'In the case of defined benefit schemes, additional costs would have to be met by the employers who are responsible for ensuring that the scheme has enough money left to pay the benefits that are due. In most defined contribution schemes, the cost would ultimately come out of pension savers' retirement pots.
'The sums that each scheme needs to find may not be huge but this goes against the grain of the government's intention to make defined benefit schemes less burdensome for employers and to cap charges in defined contribution schemes because "seemingly small variations in charges can result in a considerable difference in people's final retirement savings",' said Roberts.
According to Towers Watson, ECON's recommendation follows comments made by EIOPA chair Gabriel Bernardino in May, when he called for partial financing of EIOPA through a levy on the industry. On top of this, EIOPA has been pressing for greater supervisory powers and is continuing to work on possible reforms to solvency standards for defined benefit schemes.
EIOPA's budget for this year is 18.8m, 60% of which comes from national supervisors.
Roberts continued: 'An expanding workload for EIOPA is likely to mean an expanding budget and ECON's proposals would make it easier to get pension schemes and insurers to pay for this.
'Even if the idea was only to cut out the middlemen and make pension schemes pay EIOPA directly, it would still give a European regulator a direct claim on pension fund assets for the first time and open the door to higher payments in future. The National Association of Pension Funds recently called for a single regulator of UK pensions. It's unlikely that the NAPF had EIOPA in mind, but EIOPA might think differently.