Actuaries and pension experts have expressed reservations at the European Insurance and Occupational Pensions Authority's (EIOPA) Solvency II-style pension proposals.
Responses to EIPOA's consultation paper on further work it is carrying out on the solvency of Institutions for Occupational Retirement Provisions (IORPs) have been submitted over the past week. These include submissions by actuaries Barnett Waddingham and umbrella pensions body the National Association of Pension Funds (NAPF).
This consultation focuses on various difficult elements of the Holistic Balance Sheet (HBS) and identifies where further work is necessary in order to better specify or bring more clarity on some elements of it and on how it could be used in practice.
Following the consultation and an impact study, EIOPA intends to provide advice to the European Commission on EU-wide solvency rules for pension schemes. One of these areas is the valuation of legally enforceable sponsor support. The overarching principle is market consistency when valuing liabilities and assets.
The HBS is discussed as both a potential driver of capital requirements for pension schemes and as a risk-management tool.
However, experts have warned that the introduction of Europe-wide solvency requirements could accelerate the current decline in defined benefit pension provision and risk undermining the security of members' benefits.
Barnett Waddingham accused EIOPA of 'once again, missing the point' with its proposal, saying it was 'complex, costly and counterproductive'.
Rowan Harris, an actuary at Barnett Waddingham, said: 'There remain key differences between the level and type of benefits in member states, driven primarily by social and labour law, and so it is not appropriate for solvency requirements to be set at European level.'
He said any proposal by EIOPA to increase funding requirements should not be taken lightly given their impact on the companies sponsoring pension schemes and, therefore, prospects for employment and economic growth.
Harris said the consultation had ignored considerable progress that has been made by pension schemes in recent years under the current funding regime.
'In the UK, the Pensions Regulator's Code of Practice encourages a proportionate approach to funding and risk management. Trustees and employers are more engaged than ever in understanding the funding of their schemes, their employer covenant, and the risks they face. The HBS approach as envisaged by EIOPA would be complex, costly and counterproductive.'
NAPF chief executive Joanne Segars said that there were much more immediate needs that EIOPA could be dealing with and warned that the regulator risked being left behind at a time when the rest of the pensions world had moved on.
She said: 'We are very disappointed that EIOPA has chosen to press ahead with this work on solvency for pensions. By pursuing the HBS project, for which it has no mandate from the European Commission and has been widely opposed.
'There are far more pressing challenges that EIOPA should be addressing. The new European Commission is focusing on encouraging long-term investment, the proposed IORP Directive aims to strengthen governance and communications, and the industry is working hard to deliver good value and high quality pensions.
'The NAPF recognises that EIOPA has responded to previous rounds of consultation by including options for principles-based approaches and more flexible implementation at a national level, which is welcome and we hope they will listen again. There is no case for a single, pan-EU system.'