Alex Waite comments on EIOPA advice on IORP Directive review
15 February 2012

Commenting on today's announcement from the European Insurance and Occupational Pensions Authority ("EIOPA"), Alex Waite, partner, at LCP said:

"EIOPA's confirmation that they will press on with developing the 'Holistic Balance Sheet' idea - as part of a Solvency-II style directive for pension schemes - is not a surprise. The Holistic Balance Sheet is a noble and ambitious objective, and an appropriate one in certain circumstances. However, it is clearly not a cost-effective mechanism for dealing with the vast number of widely differing occupational pension schemes across Europe. It will be interesting to see whether the principles are diluted as the process develops"

"The European Commission's stated aim is to increase the number of pan-European pension schemes; however, that is likely to be achieved through the complete closure of Defined Benefit pension systems, for example in the UK, Ireland and Germany, in favour of contract-based personal pensions on a Defined Contribution basis. There may well be a leveling down of benefits for employees at the same time."

"With yet more retrospective legislation being piled on employers, many will close down their occupational pension schemes, and pass the risks to large insurance companies. A number of employers have already taken advantage of the current favourable insurance pricing, before excess demand pushes up the price of buying insurance."