EC fails to grasp diversity of European pension systems, says NAPF
UK - The European Commission's attempt to harmonise regulation shows that it lacks a proper understanding of European pension systems' diversity, according to the UK National Association of Pension Funds (NAPF).
James Walsh - speaking on the day the European Insurance and Occupational Pensions Association (EIOPA) closed its Call for Advice (CfA) on a new IORP directive - argued that tackling such problems as differing tax systems would do more to foster cross-border schemes than pushing through a new directive.
The European Federation of Retirement Provision had previously criticised the CfA as being premature and too reliant on Solvency II. Walsh, the NAPF's senior policy adviser, also warned about the impact of Solvency II on UK pension funds, claiming that the increased cost of funding would deter sponsors.
Speaking with IPE, he said that if the Commission developed a "firm understanding" of differences within the European pension system, it would better appreciate the potential complications of pan-European pensions regulation.
"The more appreciation they have of the sheer variety of pension schemes, the more they would appreciate the difficulties that would be involved in having greater harmonisation of pension regulation," he said. "That might help dissuade them from the course they seem to be set on."
Walsh was also critical of Commission proposals for a new IORP directive, saying its belief that a "bigger and better" directive would lead to an increase in the number of cross-border funds was flawed.
Lack of demand, he said, is the real reason for slow growth.
He said it was more important to tackle tax discrepancies in member states, adding: "The Commission really hasn't made a proper case, and we don't buy their argument that, by having a new IORP directive, the starting point for it should be Solvency II."
He reiterated that imposing Solvency II on the UK would "accelerate" the trend of scheme closures, as defined benefit arrangements became evermore expensive for company sponsors to maintain.
He said the definition of professional qualifications in the IORP directive could result in the exclusion of trustees, as the 'fit and proper' test would not be compatible with the UK system of lay trustees.
"This illustrates the difficulties involved in taking articles from Solvency II, trying to tweak them a little bit and inserting them into the IORP directive," he said.
Walsh said it was "essential" trustees be allowed to continue, as they serve to represent member interests - adding that, alongside Lord Myners' decade-old principles for occupational schemes, the Pensions Regulator ensured trustees met certain standards.