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Cross-border pension fund launches stagnated in 2010, says CEIOPS

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  • Cross-border pension fund launches stagnated in 2010, says CEIOPS

EUROPE - New figures released by the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) show that the number of cross-border IORPs stagnated in 2010, with a net gain of only two new launches.

In its bi-annual Financial Stability Report for 2010, the organisation, which next year will be replaced by European Insurance and Occupational Pensions Authority (EIOPA), said that while seven new cross-border schemes had launched between June last year and the middle of this year, the growth had been offset by the closure of five existing schemes.

Overall, 78 IORPs now existed across seven member states including Belgium, Luxembourg and Germany.

"Activity is mainly concentrated in two home states, the UK having 37 and Ireland having 25. However, greater diversity is seen in the host  member states with 22 member states acting as host to cross-border IORPs," the report said.

However, the report was compiled ahead of the Netherlands passing its new law allowing the establishment of Premium Pension Institutions in the country, which Mercer estimated could lead to 15 new cross-border vehicles by the end of 2011.

The organisation also highlighted the problems facing schemes due to low long-term interest rates. Pension funds and insurers, which face long-term obligations, are particularly affected by the bond market.

CEIOPS welcomed the shift towards defined contribution (DC) and away from employer sponsored defined benefit plans, saying: "This trend will help reducing the vulnerability of sponsors and the pension fund sector as a whole to the funding risks traditionally related to DB plans."

However, it conceded that the transfer of risks to members in DC schemes was not ideal, especially in the absence of "sensible" default funds for some schemes.

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