EUROPE - Jaap Maassen, director of pensions at giant Dutch pension fund ABP, argues pension schemes would become too expensive if they were to be co-opted into the European Commission's Solvency II framework for insurance companies.
"Solvency II would mean a degree of certainty that is five times more stringent than at the present time," Maassen said.
This would force schemes to sell off equities. This means "you are basically foregoing better investment returns - and without those better returns you lose the opportunity to index properly, unless of course you are prepared to raise pension fund contribution s significantly, which is not an option," he said, in an interview in Directions, published by ABN Amro Mellon,
He pointed out that pension fund products and insurance company products should not be lumped together, as different criteria apply.
In the interview, Maassen welcomes the recent decision by the EC to postpone the introduction of the directive until the end of 2008 and said he would be happy to see the deadline extended "as far into the future as possible".
In December the Financial Services Authority (FSA) acknowledged it has been agreed that occupational pensions should remain outside the scope of the review of the capital adequacy regime for the European insurance industry.
But the FSA said: "There remains the question for the future of whether the pensions directive [Institutions for Occupational Retirement Provision] will subsequently be amended to replace references in that directive to the current Solvency I directives with updated references to Solvency II, thereby requiring occupational pensions to comply with some or all of the requirements in the new framework."