UK - The review of the IORP directive has been branded the "biggest threat" to come out of Europe in recent years, with the National Association of Pension Funds (NAPF) ranking damage it could cause as more severe than the introduction of the European Market Infrastructure Regulation and the Alternative Investment Fund Management directive.

Opening the NAPF's Investment Conference in Edinburgh yesterday afternoon, the organisation's investment council chairman Martin Mannion said the "ever-present threat" posed by Solvency II served to offset any positives that could come out of the review, which concluded late last year.

He echoed widespread industry sentiment that the European Commission's starting point for the review was "fundamentally flawed", telling delegates: "On the one hand, the Commission says it wants to level the playing field between occupational schemes and insurers. But that misses the point.

"Occupational schemes and insurers are different in this respect - occupational schemes are not-for-profit entities and have the backing of the scheme sponsor. Insurers do not."

However, Mannion, also head of finance and risk for the GSK UK Pension Schemes, admitted that not all aspects of the IORP directive were inherently bad, citing the Commission's wish for greater security, adequacy and sustainability as a worthy goal, offering the right building blocks for "any successful" system.

He echoed previous statements by the NAPF, as well as numerous business organisations, that solvency for pensions and the resulting increased capital buffers would divert capital away from a struggling industry, while attacking comments made by Michel Barnier last week at an open hearing on the IORP review.

Mannion said that, according to their own estimates, Solvency II would increase UK pension fund liabilities by around £300bn (€360bn).

"Commissioner Barnier, the man behind these proposals, says these impacts are 'caricatures'," he said. "I say they are not. They are real and present dangers.

"So our message is clear - applying Solvency II-style rules risks fatally damaging pensions and damaging the long-term prosperity of the UK and EU economies.

"This is the wrong directive at the wrong time, and the NAPF will keep working to oppose it."

Elizabeth Corley, chief executive at Allianz Global Investors, attempted to strike a more upbeat note on the outcome of the open hearing, citing Barnier's seeming acceptance that Solvency II should not be applied to IORPs.

At the time, Barnier said he had never "said or implied" pension funds should be subject to "exactly the same rules".

"The hearing last week was very positive in the sense that there was an acknowledgement that pension funds are not insurance companies," Corley told attendees.

"There may be a way forward that stops this roller coaster of applying Solvency II to pension schemes."

However, she warned that Barnier's promise would not mean the end of potentially harmful legislation.

"Now that might seem small - again, it's the silver lining of the dark cloud - but the dark cloud is still there," she said.