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Pension funds should be given 'priority' after employer insolvency

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  • Pension funds should be given 'priority' after employer insolvency

EUROPE - Pension funds should be granted greater priority in the event of an employer's insolvency, the European Federation for Retirement Provision (EFRP) has said.

Releasing its position paper on the European Commission's White Paper on pensions, the organisation also said the revised IORP directive should look to enhance the coverage of pension funds and once again rejected the notion of a Solvency II-based regime for funds.

Referencing plans to revise the IORP Directive, the EFRP said it offered "an opportunity to improve protection of workers' pension rights" in case of insolvency.

"A broadening of the scope of the 2008 Directive could lead to wider coverage of protection, and new rules on the priority of creditors in favour of IORPs and pension plan members could also be envisaged," it said.

Recent court rulings in the UK against the collapsed European division of Lehman Brothers and Nortel Networks found that outstanding payments to its respective pension funds, as demanded by the Pensions Regulator, needed to be met prior to those to unsecured creditors.

Addressing the more contentious aspects of a revised IORP Sirective - the proposed introduction of capital adequacy rules based on Solvency II - the EFRP said this was unnecessary, as funds did not sell products and were backed by sponsors.

"The Directive should aim to enhance the coverage and efficiency of workplace pensions, rather than to pursue theoretical 'level playing fields' between providers that do not compete in reality," it said.

"The EFRP invites the European Commission to align the IORP revision and the White Paper on Pensions, with a view to pursuing the security of pensions and the joint objectives of adequacy and sustainability."

The organisation further highlighted the need for any changes to take into consideration the "uniqueness and diversity" of IORPs across Europe, saying such an approach was the only way to achieve the desired security of benefits.

Addressing the European Parliament's economic and monetary affairs committee yesterday, the chairman of the European Insurance and Occupational Pensions Authority (EIOPA) Gabriel Bernardino said the authority was currently preparing a quantitative impact study (QIS) on the shape of the holistic balance sheet - the proposed method for taking account of the diversity of pension funds across Europe.

"We will run a seminar for participants in the QIS to help them through the exercise and learning from their expertise and take into account ways of facilitating the participation in the exercise," he told the committee.

IPE recently learned that the QIS was likely to launch in mid-October despite the volume of responses to the consultation on the shape of the QIS.

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