The European Commission is to postpone new solvency-II style capital requirements for defined benefit pensions.

European Commissioner for Internal Market and Services Michel Barnier told a conference in the Netherlands he will not include Solvency-II type regulation proposals in the new version of the Directive on Institutions for Occupational Retirement Provision (IORP Directive).

“The situation needs to be re-examined once more data has been collected,” Barnier said.

However, he stressed that the pensions industry “must not lose sight of the need to guarantee in the longer term a level playing field between different providers of occupational pensions.”

It has been estimated that a Solvency II-equivalent regime would add £450bn to DB pension costs and UK Minister for Pensions Steve Webb recently described the plans as “reckless”.

NAPF EU and international policy lead James Walsh said the diversity of pension systems across the EU makes it very difficult to devise a ‘one size fits all’ system.

“We welcome Commissioner Barnier’s sensible decision not to go ahead with the new rules on pension scheme funding,” Walsh said. “This is good news for British pension schemes. The proposals could have increased UK defined benefit pension deficits by 50 per cent, causing great damage to pension schemes and their sponsoring employers.”

Solvency rules will now become a task for the next Commissioner, who will be appointed in November 2014.

Other aspects of the proposals are still going ahead. Barnier announced that the directive will focus solely on revised transparency and disclosure rules, to be published in Autumn.

The commissioner said the IORP Directive has significant gaps in its handling of internal risk management and control systems for occupational pension funds. Existing monitoring and supervision systems vary between member states, increasing costs for funds operating cross-border, hindering cooperation between supervisors and restricting the circulation of information.

LCP partner Jonathan Camfield warned that pension schemes are “not out of the woods yet”.

“The EC has made it clear they are pushing ahead with other aspects of their proposals in the areas of governance and transparency. It is reasonable to assume that this includes the possibility of requiring pension schemes and sponsoring companies to disclose new financial information that is prepared in line with insurance company style regulations. Preparing this information would be an unwelcome additional burden on UK pension schemes. For example, ratings agencies, credit analysts, lending banks and investors might start using the numbers to assess pension risk for UK companies.”

Share Story: