Anger Erupts Over ‘Vague’ Pension Reforms

by Mike Foster and Mark Cobley, Financial News 

January 9, 2012

  European Union


Picture Credit: efinancialnews.com

Pension executives fear the EC will force schemes to match liabilities with expensive sovereign bonds. They say proposed supervisory controls would intensify the risk aversion displayed by schemes and add to costs.

Uncertainty over the implications has led to widely varying estimates for the extra costs, ranging from at least £300bn, according to the National Association of Pension Funds, to as much as £1 trillion, according to Towers Watson.

Last March, the EC put forward the idea that pension schemes’ liability measures should be toughened in line with Solvency II, to put them on a level playing field with insurers. It asked the European Insurance and Occupational Pensions Authority to prepare a consultation paper.

Schemes said the consultation period of just over two months, which ended last week, was too short to permit a considered reply to the 517-page paper published last October. The UK’s Financial Reporting Council said: “Despite its length, the consultation paper still does not set out proposals clearly enough for us to assess the impact of possible changes on pension schemes, their beneficiaries and their sponsors. This is compounded by the absence of a full impact assessment.”

The Federation of Dutch Pension Funds criticised the short consultation period and added: “We doubt Eiopa itself will have enough time to properly analyse the answers of the stakeholders given that it has to present its final advice in mid-February.”

According to consultant Mercer: “The objectives behind the review of the directive and the adoption of Solvency II principles are unclear and short term.”

Its rival Towers Watson said: “We believe a rushed review without adequate opportunity for further consultation and impact assessment could ultimately harm rather than support workplace pension provision throughout the EU.”

According to British representatives in Brussels, the UK’s prospects in the regulatory debate could also be hampered by David Cameron’s veto of a new treaty aimed at rescuing the euro.