European pensions regulator steps back from radical funding proposals
The European pensions regulator has stepped back from an attempt to standardise pension funding rules across the European Union.
The European Insurance and Occupational Pensions Authority (EIOPA) has concluded, rather unsurprisingly, that the diversity of European pension schemes means that harmonising capital or funding requirements for IORPs is not suitable “at this point in time”.
This morning’s announcement removes a degree of uncertainty from British defined benefit schemes, who could potentially have faced a more onerous and complex funding regime at odds with the existing UK approach.
EIOPA’s long-running search for a means of introducing a “holistic balance sheet” threw up a myriad of potential complications for UK pension schemes, not least of which was estimations of the value of sponsors’ support.
After looking at six potential options, EIOPA has plumped for a harmonised risk management and transparency tool.
The likely cost of implementing EIOPA’s proposals are estimated at £50,000 for a large UK scheme or £20,000 for small schemes. This will amount to a total bill of £160 million a year for UK defined benefit schemes, although it could be less if its requirements can be aligned with existing reporting requirements for UK schemes.
But there is no guarantee that such rules will ever come to be implemented. The Opinion merely contains EIOPA’s recommendations to the European Institutions. It will be up to the European institutions to decide whether to take these up. They are therefore not legally binding.
Defined contribution schemes are unaffected by the proposals.