The European Insurance and Occupational Pensions Authority (EIOPA) is working to improve methodologies for assessing the holistic balance sheet (HBS) approach within the IORP II Directive, with the view to presenting further tested technical proposals to the new European Commission next year.  

EIOPA’s chair, Gabriel Bernardino, speaking at the hearing of the chairmen of the three European Supervisory Authorities, said the first quantitative impact study – which aimed to assess the HBS approach – had revealed large differences in the protection of members and beneficiaries across Europe.

He also pointed out that pension funds disposed of “vulnerabilities” in different areas.

“Some are very dependent on future payments by the sponsor, and, in others, substantial benefit reductions are expected,” he said.

“EIOPA stands ready to undertake all the necessary work in order to ensure safe, sustainable and adequate pensions for European citizens.”

He said EIOPA was now working to improve definitions and methodologies for assessing the HBS approach and would run further assessments in the coming months.

“My aim,” he said, “is to present the next Commission with further tested technical proposals for a European, risk-based prudential regime that appropriately reflects the specific reality of pension funds.”

At a closed-door event in Brussels in July, Bernardino announced that the HBS approach within the revised IORP Directive was not “a dead-end street”, in spite of the European Commission’s decision earlier this year to postpone pillar one for the same directive.

The HBS approach is, according to him, a way to capture “the wide variety of occupational pension systems in the different member states in a single, European prudential regime”.

“The holistic balance sheet allows pension funds to recognise the value of all security and benefit-adjustment mechanisms available to them,” he said at the time.

“All in all, the holistic balance sheet is able to provide a comprehensive and comparable view of how far occupational pension promises are supported by financial assets, sponsor support and pension protection schemes, and how far benefit adjustments are expected to occur.”

In May, Michel Barnier, the current commissioner for internal market, said the Commission would postpone the implementation of pillar one, which focuses on capital requirements, arguing that solvency rules should be an “improvement for the pensions sector, rather than a punishment”.

Barnier said he considered the quantitative rules to be a job for his successor.