Sweden should disregard calls by the IMF to impose capital requirements on its pensions sector, as the notion has already been “clearly rejected” by the European Commission during its most recent review of the IORP Directive.
PensionsEurope argued that the IMF was “badly mistaken” to propose a framework akin to Solvency II for Sweden’s pensions sector, which a report released last week argued was required to equalise the level of protection afforded to consumers.
Matti Leppälä, PensionsEurope’s secretary-general, told IPE the proposed capital requirements would not increase benefit security but would undermine the sector’s ability to invest in the real economy or contribute to economic growth.
“Solvency II-type rules for IORPs have been clearly rejected by the European Commission, as it didn’t propose them to the soon upcoming IORP Directive,” he said.
Leppälä also argued that the European Insurance and Occupational Pensions Authority (EIOPA) had warned that capital requirements could have a “significant negative impact” on the pensions sector but also on individual fund sponsors.
“The IORP II,” he added, “explicitly states that the further development at the EU level of solvency models is not realistic in practical terms and not effective in terms of costs and benefits, particularly given the diversity of pension funds across member states.”
Leppälä said the IMF should “respect” the views of European policymakers, EIOPA and individual member states.
“It is up to Sweden to decide the design of its pension system,” he said.
The IMF report argued that the introduction of Solvency II had improved the quality of reporting across Sweden’s insurance sector and boosted solvency ratios across the sector, which manages assets in excess of the country’s GDP.
However, the European directive only applies to around 44% of the market, with pension insurance companies enjoying an exemption until a transitional period comes to an end in 2019.