EUROPE - A group of eight industry associations from across Europe has called on the European Commission to reconsider plans to apply Solvency II measures to pension funds, stressing that occupational pensions are often bound by collective agreements and labour laws and are therefore obliged to protect members' benefits and interests.
In the run-up to today's public hearing on the revised Institutions for Occupational Retirement Provision (IORP) directive in Brussels, the group warned of the impact Solvency II rules would have on the pensions industry.
The group includes BUSINESSEUROPE, the European Association of Craft, Small and Medium Sized Enterprises, the European Association of Paritarian Institutions (AEIP), the European Centre of Employers and Enterprises providing Public Services, the European Federation for Retirement Provision (EFRP), the European Fund and Asset Management Association, the European Private Equity and Venture Capital Association and the European Trade Union Confederation (ETUC).
Matti Leppälä, secretary general at the EFRP, said: "More workplace pensions are needed to guarantee adequate retirement benefits for citizens across Europe. The European Commission is in a position to enable good-quality workplace pensions.
"However, if it imposes capital requirements on IORPs, then it jeopardises the future of pensions in Europe because IORPS will de-risk their assets, and employers will find it very expensive to continue funding their pension schemes."
Adopting the quantitative solvency II rules to workplace pensions would produce three important adverse effects, according to the group.
First, risk-based capital requirements and valuation methods would force pension funds to build up higher reserves, raising the cost to employers of providing occupational pensions.
Second, under the new rules, pension funds would likely de-risk their asset allocation, making less capital available to companies to create growth and jobs.
Third, Solvency II rules would be particularly damaging if all investors with long liabilities had to invest under the same rules, even if their structures were very different.
The group also reiterated its demand for a full impact assessment before a final version of the revised IORP directive is implemented.
In a statement, the group said: "The impact of any new proposals must be measured through high-quality quantitative impact studies, including assessment of the social, financial and economic effects of any proposed rule changes, and their macroeconomic effects.
"A high-level political debate is also required with involvement from all the relevant stakeholders, most notably the European social partners."
Bruno Gabellieri, secretary general at the AEIP, added: "Occupational pension schemes are in most cases compulsory as a part of the national labour law or collective labour agreements. Therefore they are not involved in any level playing field and do not compete with other providers.
"The goal of the regulation should consist in facilitating the existence of good pension schemes for European workers and citizens, and, therefore, social partners should be allowed to steer the promises they make rather than have extra capital costs imposed, which are a burden for the employers."
Claudia Menne, confederal secretary at the ETUC, echoed Gabellieri's thoughts.
"We have growing concerns regarding the possible plans of the EU Commission to propose a new solvency regime for occupational pensions," she said.
"The proposals will significantly change investment patterns, restricting capital flows to business, resulting in lower benefits for pensioners.
"Occupational pensions are part of collective agreements and are restricted by labour and social laws to a legal obligation to protect members' benefits and interests."