The viability of a harmonised system of pension funding rules across the European Union will depend on the outcomes of a quantitative impact assessment, which is essential for any legislative proposal, the European Insurance and Occupational Pensions Authority (EIOPA) has warned.

In a 517 page consultation document published yesterday on its draft response to the European Commission’s request to advise them on the future of the Institutions for Occupational Retirement Provision (IORP) directive and on the legislative framework concerning IORPs, the EIOPA underlined how funding arrangements should be harmonised for workplace-based pensions.

Advice has also been sought on what quantitative requirements should apply to IORPs and how these should be measured, secondly what should be the qualitative requirements in respect to the governance of IORPs and also what information should be provided to members, beneficiaries and supervisory authorities. The review of the IORP directive was conducted in order to propose measures to simplify the setting-up of cross-border pension schemes.

Towers Watson senior consultant Mark Dowsey said: “The central theme running through EIOPA’s advice is a so-called ‘holistic balance sheet’ for pension schemes. Liabilities would be calculated on a conservative basis –though precisely how conservative is still being debated – and would then have to be balanced by a mixture of assets, contingent assets, sponsor support and possible access to compensation schemes.”

However, head of research at Punter Southall Jane Beverley said that industry figures should be “wary” about welcoming EIOPA’s draft advice too warmly with regards to the adoption of a ‘holistic balance sheet.’

“The sponsor covenant would have to be explicitly valued in order to be taken into account as a notional asset in the balance sheet calculation, something that EIOPA itself notes would be a ‘potentially complex and costly exercise for IORPs to undertake.”

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