NAPF endorses European Pension Association's report and calls on MEPs not to undermine workplace pensions

The European Federation for Retirement Provision’s (EFRP) report1 - “IORP Directive – securing workplace pensions”, published today, outlines the important role that workplace pension schemes play in dealing with Europe’s ageing population. The National Association of Pensions Funds (NAPF), as the UK member2 of the EFRP, endorses the report and calls on MEPs not to propose extending the Solvency II proposal to company pension funds (IORPs – Institutions for Occupational Retirement Provision).

The report explains the ways in which company pension schemes (IORPs) differ from insurance-based pensions and how a change in the regulatory regime from the IORP Directive to the Solvency II Directive would substantially increase costs and lead to scheme closures. This issue is under consideration in the European Parliament3.

Several Member States, including Belgium, Ireland, Netherlands, Spain, and the United Kingdom, would be severely affected. In these countries, funding levels would have to be increased by 40-60%. The report also suggests that the change of regime would be accompanied by a sell-off of equities which could threaten the stability of the EU’s financial system.

Commenting on the EFRP report on pension scheme funding rules, Nigel Peaple, NAPF Director of Policy, said,

“We hope MEPs are listening because if they extend the rules for insurers set out in the Solvency II Directive to company pension schemes (IORPs), they will undermine pension provision across the EU.

“The report is clear. Rather than securing pensions, applying Solvency II to company pension funds operated under the IORP Directive would simply lead to their closure.

“The parliamentary rapporteur, Peter Skinner MEP, has the right approach but others in the European Parliament are less well informed.”

Company pension funds (IORPs) are different from insurance-based pensions in a wide number of ways and so require a different approach to regulation. In particular:

(1)IORPs have a plan sponsor (usually an employer) that provides a guarantee that the pension will be paid (and in some countries, additional protection is provided by a guarantee fund);

(2)IORPs often include adjustment mechanisms that allow the scheme to be altered through its lifecycle in order best to meet the interest of all members – active and deferred;

(3)IORPs have a governance structure involving the Social Partners or employee representatives – this ensures that the schemes are operated in the best interest of the pension scheme members;

(4)IORPs are not-for-profit organisations thereby removing some of the need to protect scheme members from risks that arise where those operating the scheme have a commercial interest.


ENDS

Notes to Editors

1 The EFRP report, “IORP Directive – securing workplace pensions” and accompanying press release is available at http://www.efrp.org/web.html

2 The NAPF is the UK member of the EFRP and NAPF Chief Executive, Joanne Segars, is a director of the EFRP.

3 The EU institutions are currently considering the scope of the Solvency II Directive on funding rules for insurers. Although the European Commission and the Council of Ministers appear to favour leaving company pension funds outside the scope of the Directive (as they already have a separate EU legal regime), there is currently a range of views present in the European Parliament. The European Parliament rapporteur, Peter Skinner MEP, agrees that they should be excluded but some MEPs are taking a different line.

About The National Association of Pension Funds

The NAPF is the leading voice of workplace pension provision in the UK. Some 10 million working people are currently in NAPF Member schemes, while around 5 million pensioners are receiving valuable retirement income from such schemes. NAPF Member schemes hold assets of around £800bn, and account for approximately one fifth of investment in the UK stock market.

Journalists requiring further information, please contact Mark Brooks via

020 7808 1312 mark.brooks@napf.co.uk 07917 506683


Mark Brooks
Head of Press
Tel: 020 7808 1312 07917 506 683
Fax: 020 7222 7585
http://www.napf.co.uk