Pressures to align the Institutions for Occupational Retirement Provision (IORP) directive with Solvency II (SII) into a one-size fits all solution to pan-European pensions will add further costs to European businesses and UK defined benefit pension provision, Mercer has warned.

Whilst acknowledging that the alignment of the IORP directive and Solvency II would create a greater risk control framework for pension funds, Mercer stated that many will struggle to meet EU aspirations due to current local market conditions.

Head of Mercer’s regulatory team Deborah Cooper commented: “Since there is no impact assessment attached, we are concerned that the pressure to align the IORP directive with Solvency II risks losing sight of the financial consequences for employers in the few countries with funded defined benefit schemes, who will be most affected by the proposals.”

It has also been highlighted that a consistent approach to the regulation and solvency levels applying to insurance companies and pension schemes is expected to cause increasing complexity in pension regulation.

“Each local market and their pension arrangement are as different as snowflakes; a one-size-fits-all approach will not one in every case,” Cooper added.

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