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EIOPA's QIS technical specifications reveal 'tensions' with Brussels

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  • EIOPA's QIS technical specifications reveal 'tensions' with Brussels

EUROPE - UK pensions experts have claimed that the draft technical standards published by the European Insurance and Occupational Pensions Authority (EIOPA) reveal "tension" between the authority and Brussels on the revised IORP Directive, particularly with respect to the number of quantitative impact studies to be conducted and the timescale for the revised Directive.

Reacting to EIOPA's publication of the draft technical specifications on the launch of the QIS yesterday, the NAPF argued that the authority was proceeding at a "completely different" pace from the European Commission.

James Walsh, senior policy adviser at the NAPF, said: "In this document, EIOPA said they wanted to investigate many topics through further rounds of QIS exercises.

"If that happened, there would be no way that the EC could draft any Directive in the summer 2013 as they previously stated. This marks a real tension between EIOPA and the Commission."

Dave Roberts and Mark Dowsey, senior consultants at Towers Watson, echoed those thoughts and called on EIOPA and Brussels to conduct those additional studies before the text for a revised Directive is drafted.

However, according to them, there is no guarantee that the techniques and specifications proposed for the QIS will make their way into any new regime.

"The QIS is a 'first impression' only, and a new regime could differ significantly," they said.

In its feedback, EIOPA argued that further work would be needed to investigate fully the consequences a number of requirements under the revised IORP Directive would have on pension funds.

According to the authority, further QIS should assess the sponsor support, the pension protection schemes, the confidence levels at levels other than 99.5%, the parameters and correlation matrices, the minimum capital requirement (MCR) as set under Solvency II, the long-term guarantees, the risk margin, the segmentation of pension obligations, the discretionary benefits, the inflation risk and the proportionality approach.

Jonathan Camfield, partner at LCP, said the technical specification aims to put a value on a company's financial strength in a mechanistic way, which will result in "meaningless" figures for many companies with pension schemes.

"It seems that the path towards IORP II pensions reform - which could have a catastrophic impact on UK pensions - is unrelenting," he said.

"We can only hope Europe realises that trying to shoehorn pension schemes into a one-size-fits-all regime like this will create widespread anomalies and be unnecessarily destructive for pension schemes and their sponsoring employers."

Towers Watson's Roberts and Dowsey also stressed that the Commission had previously stated that it intended to publish a draft Directive in summer 2013.

"Whether this remains possible will depend on the extent to which it heeds EIOPA's advice on more work being required and, more significantly, when it considers that any such work needs to take place," they said.

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