New proposals for the holistic balance sheet (HBS) have been given a cautious welcome by the pensions industry, with consultants and pension associations pleased with the “pragmatic” approach pursued by the European Insurance and Occupational Pensions Authority (EIOPA).
The European supervisor yesterday launched a consultation on the shape of the HBS, outlining six possible approaches but also shedding more light on how it could assess the support of a sponsoring company or account for variable benefits.
James Walsh, EU policy lead at the UK’s National Association of Pension Funds (NAPF), said the organisation was “disappointed” with EIOPA’s launching the HBS consultation despite pledges by the European Commission to abandon pillar I of the revised IORP Directive, detailing capital requirements.
“Although we would prefer EIOPA to drop this altogether,” Walsh added, “we are pleased it has acknowledged the concerns raised in previous consultation rounds.
“The shift away from a ‘one-size-fits-all’ system and towards more flexible implementation at national level is an important step in the right direction, but there are more pressing priorities for EU policymakers to address.”
In the consultation, EIOPA said it accepted that a ‘one-size-fits-all’ approach to the assessment of sponsor support should be replaced with a principles-based approach.
Mark Dowsey, senior consultant at Towers Watson in the UK, told IPE the proposals were “very positive” but said he did not wish to underplay the potential risks.
He said any attempts to proceed with elements of the HBS were likely to include a re-drafting of the risk-evaluation for pensions (REP) regime proposed in IORP II, tying the efforts in closely with the quantitative, pillar I proposals.
However, due to the significance of the changes, Dowsey said he believed this would not be possible without a further revision of the IORP Directive, and that it was therefore unlikely to occur as part of the current revision.
“EIOPA will be aware any attempt on its part or the Commission’s part to introduce quantitative measures to the REP during its current passage through the legislative process would probably cause it to flounder because they are going to trigger so much aggravation and animosity,” he said.
Aidan O’Mahony, a partner at Aon Hewitt’s UK office, welcomed the more “pragmatic approach” pursued by EIOPA, particularly in terms of valuing sponsor support.
But he said the continued focus on aspects of the abandoned pillar I matters surrounding quantitative measures was “unhelpful”.
He echoed Walsh in welcoming EIOPA’s plans to abandon a ‘one-size-fits-all’ approach for sponsor support.
“This is a step forward from the previous detailed specification of calculations to be applied to all IORPs, which failed to recognise the variation in the nature of IORPs between countries.”
EIOPA’s consultation on the HBS will close in mid-January.