EUROPE - The continuing row over pensions solvency and differing regulatory systems could be solved by developing a common language for pensions, regardless of the provider or delivery, according to Jos Streppel, chief financial officer at Aegon NV.
Speaking at the Committee for European Insurance and Occupational Pensions Supervisors (CEIOPS) Conference in Frankfurt last week, Streppel suggested there was not necessarily a need to develop a level-playing field on pensions regulation between and insurance-led providers under the proposed Solvency II directive and those who fall under the Institution of Occupational Retirement Provision (IORPs) directive.
Instead, he claimed greater transparency and the creation of a common language would go a significant way towards explaining how schemes work and allow consumers - whether as individual policyholders or members of an employer-sponsored scheme - to understand what their pension benefits might be at retirement and how they compare with other providers.
"We have said if IORPs manage the same risks as other fund and pension providers, they should have the same principles which embody a modern economic risk-based approach to pension provision. Where there are differences to providers these should automatically be taken into account.
"If [pension plans] are IORPs, we should know how and to what extend there are differences. This not only means comparing with other providers, including life insurers, but other member states.
"We need a common methodology, not a common regulation, for the comparison of different pensions and to provide an integrated linked-up system. A common pension language is needed to deliver an economic risk-based approach," suggested Streppel.
His comments were delivered during a discussion on the solvency regime for occupational pension funds and he did disagree somewhat with the standpoint taken by the European Federation of Retirement Provision (EFRP) concerning the need to review the existing IORP directive, as Streppel said: "We should look at the directive from the perspective of all three solvency pillars. And a full review of the IORP directive should be a priority."
During that same session, Angel Martinez Aldama, chairman of the EFRP, said "not applying Solvency II to pension funds does not mean we should not apply solvency requirements on IORPs" though noted given the little time the directive has been in place in some member states there was need for a "legislative pause" or no further action in the short-term as the policy needs time to bed in.
Elemér Terták, director of financial institutions at the European Commission, who also chaired the discussion, agreed there was a need for common language though argued there should still be a level-playing field among pension providers as well as a focus on some form of guarantee for all members.
"The dispute should not be about solvency but how people are protected in the pension fund. That should be the driver of this whole issue," said Terták.
"On the other hand, if pensions are offered across the borders, for example by insurers, given the demographic position in Europe it will not be possible to maintain the first pillar as it is and that means some level-playing field is needed.
"It is useful to here there should be a common language. Even in relation to regulation we see different languages, as third pillar pensions are different for historical reasons to other member states. The language has to be brought closer because people have to realise they will have to take more responsibility for their future. The environment in which they are provided has to become safer," said Terták.
He continued: "Nobody is disputing the difference between pensions and insurers. But in the situation like General Motors [with the company fighting against collapse] how much can a sponsor do? We do not have insurance guarantee schemes in all of the member states, and likewise for pensions. The protection of people and their future pensions is the most important thing."
Dr. Withold Galinat, head of international benefits at BASF AG, said while solvency regulations were a serious concern, what his company would be especially interested in is to find a provider who could provide a multi-national service so they can use them for communication and marketing purposes to all of their members.
"We have yet to find a provider who can also provide all of the benefits," said Galinat.
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