Europeans pensions authority 'risks being left behind'

The National Association of Pension Funds (NAPF) has expressed "concern" and "disappointment" at the European Insurance and Occupational Pensions Authority's (EIOPA) decision to continue work on a solvency system for pensions.

The NAPF has made its comments in response to the EIOPA's latest consultation, 'Further work on Solvency of Institutions for Occupational Retirement Provision', which advocates a 'holistic balance sheet' approach.

This approach involves pension funds having a market-consistent valuation of assets and liabilities, where the asset side of the balance sheet includes the value of the employer covenant (their debt to asset ratio).

NAPF chief executive, Joanne Segars, said: We are very disappointed that EIOPA has chosen to press ahead with this work on solvency for pensions. By pursuing the Holistic Balance Sheet project, for which it has no mandate from the European Commission and has been widely opposed, EIOPA risks being left behind at a time when the rest of the pensions world has moved on.

"There are far more pressing challenges that EIOPA should be addressing. The new European Commission is focusing on encouraging long-term investment, the proposed IORP directive aims to strengthen governance and communications, and the industry is working hard to deliver good value and high quality pensions."

She continued: There is no case for a single, pan-EU system. It would be a mistake to try to put a single numerical value on sponsor support, as this is a complex concept that requires a rounded assessment to ensure trustees fully understand the extent to which they can rely on the sponsor's backing and the risks associated with it."

The NAPF's has also said that in the event that the the EIOPA's plans were to go ahead, they should only be used in special circumstances, and should not become the rule.

Segars added: "If EIOPA were to persuade the European Commission to go ahead with the Holistic Balance Sheet, then the best option would be to use it as a risk management tool, rather than as a new funding regime."

Binyamin Ali is assistant editor of Private Client Adviser