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White Paper on pensions calls for 'level playing field' with Solvency II [updated]

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  • White Paper on pensions calls for 'level playing field' with Solvency II [updated]

EUROPE - The European Commission is planning to review the IORP directive in order to maintain a "level playing field" with Solvency II and encourage the growth of cross-border pensions, according to the final version of its White Paper on pensions.

While previous draft versions of the White Paper - which follows July 2010's Green Paper - made no particular reference to the Solvency II approach, the final version published today highlights one new major change to proposal number 11.

The White Paper says: "The Commission will, in 2012, present a legislative proposal to review the IORP directive. The aim of the review is to maintain a level playing field with Solvency II and promote more cross-border activity in this field and to help improve overall pension provision in the EU."

The sudden introduction of the increasingly controversial Solvency II issue within the White Paper will come as a surprise to many in the industry.

Matti Leppälä, secretary general of the European Federation for Retirement Provision (EFRP), said: "The first reaction of the EFRP is that this explicit reference to a level playing field with Solvency II is not the right way to take the IORP review forward, as the 'same risks, same rules' argument on which it is based does not hold.

"Pension funds differ from insurance companies in very important ways, and to create a level playing field with Solvency II would therefore be inappropriate.

"The Green Paper consultation confirmed that the EFRP is not at all alone in thinking that the application of Solvency II to pension funds would not be appropriate."

Mark Dowsey, senior consultant at Towers Watson, echoed those thoughts and balanced the Commission's views expressed on the White Paper with what the European Insurance and Occupational Pensions Authority (EIOPA) said in its advice on the IORP directive yesterday.

Dowsey said: "It is ironic that the White Paper suggests that the intention of the review is to help reduce the costs of pensions.

"EIOPA's advice yesterday was much more balanced - even within the limited remit it was given by the Commission - and emphasised the need for a full QIS before deciding how to proceed.

"EIOPA's advice also pointed out some of the key and substantial differences between IORPs and insurers that led to its conclusion that a 'consistent' approach did not equate to the 'same' approach. Moreover, EIOPA recognises the importance of proportionality in deciding on a suitable risk-based supervisory regime for IORPs."

In the latest draft version of the White Paper, seen by IPE earlier this week, the Commission reiterated its desire to reinforce second and third-pillar pensions and said it would support EU member states' efforts to raise legal retirement ages, but it made no mention of Solvency II with respect to the IORP.

Otherwise, the White Paper's initiatives on pensions reform were largely the same as revealed by IPE last week. Click here for an overview.

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