Only revised IORP Directive will revive moribund DB schemes – EIOPA
18 Oct 2012
EUROPE - Gabriel Bernardino, chairman at the European Insurance and Occupational Pensions Authority (EIOPA), has argued that defined benefit (DB) schemes are dead and will be revived only by pending changes to the IORP Directive, as he sought to fend off allegations that proposed solvency capital requirements (SCR) could force the closure of UK schemes.
Addressing the National Association of Pension Funds' annual conference in Liverpool, Bernardino said no one was interested in running a DB scheme in the current regulatory environment, noting that the number of new funds was "scarce".
The chairman, who was head of Portugal's pension and insurance regulator before assuming his role as Europe-wide supervisor, stressed that the proposed changes to the IORP Directive were necessary to improve the measurement of investment risk.
He added that some of the current regulatory structures in European countries failed to reflect the "economic reality".
Bernardino thanked the UK pensions industry for contributing to past EIOPA consultations, most recently one on the technical specifications surrounding the first quantitative impact study (QIS).
"While you sometimes say things we don't like, that's life - it's important you participate," he said.
He added that it was vital the UK, boasting one of the most advanced pension systems in the world, participate in the ongoing debate.
Bernardino also pointed out that submissions that simply opposed regulatory change were "not useful", and urged the industry to submit proposals containing constructive criticism.
"We don't want to hurt you - we want to do something better for Europe and for all of us," he said.
The supervisor earlier this week launched what Bernardino repeatedly called the first QIS, his comments contrasting with the stated wish of the European Commission and internal market commissioner Michel Barnier to publish draft legislation by next summer - only a few months after EIOPA will have submitted its final recommendations in the wake of the QIS.
In a discussion with journalists prior to his keynote address, Bernardino also sought to assure the industry that Brussels did not seek to damage DB funds with changes to the IORP Directive.
"To be completely clear on this - our objective is not to kill defined benefit," he said. "On the contrary, it's to create conditions [for it] to be possible to have defined benefit also in the future.
"The reality right now, especially in your country, is that defined benefit is killed. If we can, from a supervisory perspective, create conditions to help the sustainability, again from the supervisory perspective, then we are really doing a great job."
He said that while such a reinvigoration would not be easy, it could be done on a European level through EIOPA's principles-based approach.
"There is an internal pensions debate in each country. The last thing many people want is a European pensions debate on top of that," he said.
"What I am trying to say is, have some trust in what we are doing. We are not a bunch of lunatic, crazy guys in Frankfurt, OK? We know about pensions. We know about the reality of pensions."
He said the suggestion that the proposed holistic balance sheet would double capital requirements was untrue.
"Let's be serious," he said. "That's not, firstly, the objective, nor, secondly, the consequence."
Author: Jonathan Williams