Aon Hewitt: Pan-European pensions regime could be way forward
EUROPE - The European Commission (EC) should consider a pan-European pensions regime instead of individual national guidelines, Aon Hewitt has suggested.
In its submission to the European Insurance and Occupational Pensions Authority (EIOPA), the consultancy argued that employers should be granted more freedom to design retirement programmes to better align them with their own corporate needs.
It also urged the EC to reform the IORP directive to allow for a more business-friendly environment, guaranteeing the affordability of pension arrangements.
Leonardo Sforza, head of research and EU affairs at Aon Hewitt, said that, beyond the limits of the IORP directive, a new supervisory regime might best serve the needs of multinationals.
"The needs of multinational companies that operate in different countries and wish to provide occupational pension arrangements could be better addressed by looking at the feasibility of a pan-European optional pension regime, which could be used in place of multiple national-specific regimes," he said.
Sforza likened the changes he recommended for the IORP directive to physiotherapy, rather than an invasive medical procedure.
He said a business-friendly regulatory environment was needed, so that all parties - ranging from employers and employees through to financial service providers - could "reap the full benefit" of the EU single market.
He said: "The affordability of current and future pension arrangements for employers is a crucial issue to be considered by policymakers and supervisory authorities at both the national and European levels.
"Any new measure should not undermine the cost-effectiveness of occupational retirement provision in the European Economic Area."
Sforza said EU intervention, even if well intentioned, ran the risk of "compromising the vital organs of the many different 'pension' bodies".
Echoing calls from both national and pan-European pension representatives, Kevin Wesbroom, Aon Hewitt's UK leader of global risk services, argued that the introduction of Solvency II or similar measures would merely increase employers' costs, not expand the availability of occupational schemes.
He insisted there was a "fundamental" difference between insurance arrangements and voluntary, employer-sponsored pension arrangements.
"Forcing pension plans to hold insurance-style solvency reserves will simply encourage employers to withdraw from defined benefit pension provision, leading to poorer overall outcomes for employees," he said.
Aon Hewitt's submission to EIOPA follows its Call for Advice on changes to the IORP directive, with the UK's National Association of Pension Funds having previously warned that the EC had failed to grasp the diversity of the European pensions system.
The European Federation for Retirement Provision had also argued against the use of Solvency II as a basis for the new IORP directive, while warning against the use of the IORP label for the new eastern European pension systems, as it believes this could lead to further Hungary-style repossession of pension assets.