EUROPE - The European Commission's Green Paper on pensions must be wary when defining exactly what constitutes a pension or risk excluding existing schemes, the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) has warned.
The organisation said that while it welcomed the idea to better define the 'pension' label and limit its use to certain financial products, the security of any product should be the result of having been branded as a pension, rather than a prerequisite for achieving such a label.

In its submission on the Green Paper, CEIOPS said: "The consequences of any potential change to labels or terminology must be thoroughly considered and must not unsettle current practice, or risk causing unanticipated consequences.

"A simple restriction on the definition of pensions might lead to a situation where some existing pensions would be left outside the EU regulatory framework."

CEIOPS also suggested Solvency II could be used as a starting point for a tailor-made solvency regime for IORPs, instead of being applied in its current form.
The application of Solvency II rules to pension funds has been met with resistance in some quarters, with the UK's National Association of Pension Funds (NAPF) arguing that Britain already provides a system that protects member benefits.

Speaking of the NAPF's recently published response to the Green Paper, chief executive Joanne Segars said: "While a Solvency II type system of regulation is appropriate for insurance, the Commission needs to recognise occupational pensions operate in a very different way."

Segars called the Commission's work for a strong and sustainable retirement system commendable, but added: "The UK pension system already provides a strong system of member protection through the strength of the employer covenant, the work of the Pensions Regulator and the safety net provided by the Pension Protection Fund."

She warned that applying further solvency measures in the country could lead to more defined benefit scheme closures.

"There is a rich diversity of pension provision across member states," Segars said. "It is important the European Commission recognise this when thinking about how to meet its core objectives of member states providing a strong, adequate and sustainable pension system."

CEIOPS said the questions raised in the Green Paper had no simple answers and raised "significant challenges" for everyone involved in the European pension system.

It pointed to the paper's admission that there were ill-defined boundaries between social security, private, occupational, individual, voluntary and mandatory schemes.

It also welcomed the Green Paper's acknowledgement that no one-size-fits-all pension system existed as one of its most important statements, adding that the notion must be "borne in mind" when discussing the future.