German pension fund association vows to keep fighting HBS
The German pensions industry has issued a “clear rejection” of any attempt to standardise solvency requirements across European pension funds, according to Joachim Schwind, chairman of the German Hoechst Pensionskasse and board member at German pension fund association Aba.
At this week’s Handelsblatt occupational pensions conference in Berlin, he pointed out that the holistic balance sheet (HBS) approach was “really a Solvency II concept with additional regulation for occupational pensions”.
As such, he said it was highly complex and increased costs without taking sponsor support into account.
Previous attempts to assess the value of a sponsor to IORPs have been branded “inconsistent” and “arbitrary”.
Schwind added that, even though solvency requirements were not part of the revised IORP Directive, the industry would “still have to deal with it” due to the stress tests the European Insurance and Occupational Pensions Authority (EIOPA) has scheduled between 11 May and 10 July this year.
However, Jung-Duk Lichtenberger from the European Commission’s Insurance and Pensions Unit said it had “no plans to introduce Solvency II through the back-door” and suggested it was unlikely any commissioner would pick up the topic again in the foreseeable future.
“Harmonising solvency requirements is not an issue for us because we are aiming at solving problems of future pension arrangements, not those from past pension promises.”
His comments come after EIOPA indicated that past accrual could be excluded from any future HBS reform.
Lichtenberger also hinted that EIOPA wanted to ensure pension funds were sufficiently aware of future problems.
But Schwind pointed out the HBS was not fit to assess the solvency of pension systems because of their extremely long-term duration of 20 or more years.
He argued that even life insurers had problems calculating their solvency requirements when their duration was only 10-15 years on average.
Commenting on the IORP II draft, Schwind noted it was “very good for us” that the delegated acts granting the Commission power to regulate without parliamentary scrutiny had been scrapped by the European Council.
“This way, occupational pensions will remain more closely embedded in national pension legislation,” said Schwind.
He also pointed out the new draft included a clause to review the Directive after six years, not the four years as previously intended.
The longer time frame gives Aba and other stakeholders more time to try and prevent HBS from happening, he said.
Schwind said the paragraph in the revised directive stating that occupational pension vehicles were instruments “with a social purpose”, and not merely financial service providers, was an example of successful lobbying against over-regulation.