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Impact Investing

IPE special report May 2018

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No need for harmonisation of pension mechanisms across EU – AEIP

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  • No need for harmonisation of pension mechanisms across EU – AEIP

EUROPE – The AEIP has argued that harmonising rules for pension funds across Europe is "unnecessary" since pension rights are covered by member states' social and labour laws and often ensured through agreements signed by social partners.

In a reaction paper to the preliminary results of the first quantitative impact study (QIS) for the revised IORP Directive, the European Association of Paritarian Institutions argued that pension security mechanisms should take into account the nature of the social contract and the different security levels agreed within national social and labour laws.

Earlier this year, the association accused the European Commission of ignoring the social aspects of the revised IORP Directive.

In February, AEIP director Francesco Briganti told IPE the Commission, in revising the IORP Directive based on new solvency rules, failed to make any distinction between the prudential aspects of IORPs and social law, which is applied to the pension schemes managed by IORPs.

Additionally, the association claimed in its reaction paper that the first impact study on the introduction of a holistic balance sheet (HBS) approach within the new IORP Directive failed to "properly" address the sponsor support valuation.

This, in turn, "forced" industry-wide schemes participating in the QIS to provide "inaccurate data".

"Moreover," the association said, "the excessive reliance of the HBS model on credit rating for the valuation of sponsor support – which was due to be considered as 'junk' if no rating was available – biases the whole model and penalises those scheme backed by SMEs."

The AEIP finally called on the European Insurance and Occupational Pensions Authority to extend the scope of new impact studies, should the Commission decide to conduct further exercises, to small and medium-sized IORPs to increase the representativeness of such studies.

"The QIS has been poorly representative, with around 100 out of 140,000 European IORPs running the calculations," it said.

"The data collected and their outcomes are not representative of the whole sector and for feeding into level-one directive proposal."

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