EIOPA (The European Insurance and Occupational Pensions Authority) has today (Friday 15 June) launched a consultation on quantifying the impact of their proposed new directive for occupational pensions (the IORP Directive). The results of this impact study will help determine how much extra capital pensions schemes will be required to hold against the risk of unexpected events.
Commenting on the implications of this, Raj Mody, head of pensions at PwC, said:
“There has been a great deal of comment on the projected impact of the IORP changes on peoples’ pensions, but it is only through the impact study that we can truly develop an accurate insight into the future financial costs. It is therefore vital that the industry engages with this consultation, or risk being saddled with an overly burdensome system and inappropriate capital charges.
“It is good news that EIOPA are consulting on what options to include in the impact study, but it is unfortunate that the document is so long and complex. It would have been more helpful to have produced a series of consultations that are country specific, rather than trying to combine all nuances into one document with resulting complexity and loss of clarity.
“The short time frame for responses is a concern. This issue is of such fundamental importance that it would be sensible to allow more time to bring in as many as possible informed views, rather than rushing to a premature, and perhaps inferior, solution.
“We would encourage large pension schemes to carry out their own impact study calculations to ensure the UK figures are not understated, leading to inappropriate EIOPA figures and so that they can start assessing the strategic implications of the directive. If the impact study is the basis on which EIOPA will build the pensions framework for the future it is essential that the UK pensions industry makes its voice heard to ensure it is as realistic and robust as possible.”
Commenting on the implications for employer covenants, Jonathon Land, partner at PwC, said:
“The concept of placing a value on employer covenant is new for the UK and if implemented properly could provide additional protection for pension scheme members. However, much thought needs to be given to ensure that the approaches make sense for all aspects of the life cycle of the sponsoring employer. A single approach which is based on the recovery plan is of limited value and works only in very specific circumstances. This is one of the reasons why to date employer covenant assessment has been more qualitatively presented as this has provided a more balanced overall picture for pension schemes.”
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