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Groupe expects changes to assumptions under IORP

EUROPE - The Groupe Consultatif Actuariel Européen says it expects to see "significant" changes in the way discount rates and other pension fund assumptions are determined under the occupational pension fund directive.

The Groupe, which represents European Union actuarial associations, has issued a 26-page study called ‘Minimum Technical Provisions for Defined Benefit Occupational Pensions in the EU, A summary of minimum funding requirements'. It's edited by Chinu Patel of Watson Wyatt.

The survey highlights certain types of schemes where it is not clear if and how Article 15 of the Institutions for Occupational Retirement Provision directive will apply. 

"For example, in many countries where insurance is a common method for financing pensions, the sponsoring employer usually carries certain residual risks (for example, the risk of salary increases and some biometric risks)," the Groupe says. 

"We found no evidence of any country that requires the sponsoring employer to pre-fund for some or all of these residual risks and therefore it is arguable whether they are exempt from Article 15.

"We expect to see significant changes in the way discount rates and other assumptions are determined as EU states begin to implement the IORP Directive.

Whilst comprehensive information is not yet available on the way in which each country proposes to implement Article 15 of the Directive, there are signs that minimum technical provisions will in future be characterised by differing balances in member states between scheme collateral, regulatory powers and disclosure." Future surveys will monitor these changes.

A longer version of this article will be published in the January edition of IPE magazine.

The full text of the Groupe's study can be found on http://www.gcactuaries.org/

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