UK pension schemes and consultants have expressed serious concerns about plans to implement Solvency II-style rules across the European Union (EU), labelling the rules as "vague" and "unhelpful."

The consultation on the Institutions for Occupational Retirement Provisions Directive (IORP), which was closed last week, suggests a number of reforms, including increasing solvency levels within pension schemes in order to ensure stability. The proposal from the European Insurance and Occupational Pensions Authority (EIOPA) triggered negative reactions amongst several UK bodies, which expressed reservations about the proposals.

Pension scheme executives are concerned that the European Commission might force them to match liabilities with costly sovereign bonds.

Lawrence Churchill, chairman of the National Employment Savings Trust (NEST), claimed that EIOPA's consultations might result in new requirements, which in turn will increase costs for defined contribution schemes, including a possible requirement to retain additional capital against operational risk. Churchill called for EIOPA to make a detailed analysis of the potential impact of the proposals.

NEST thinks that the proposals do no take into account the wide range of pension provisions across Europe and the new regulations might prove a major obstacle to this diversity.

In addition, it is estimated that the implementation of the proposals in their present form would entail extra costs of £600bn for UK pension schemes.

Key contact:

David Breger
E dbreger@hwfisher.co.uk