The Coalition Government and several pensions sector bodies have responded to the EU green paper on adequate, sustainable and safe European pension systems, published by the European Commission in July of this year.
The green paper has been put in place to review the current European framework and assess the areas that require change, with the ultimate aim of developing European-wide measures that are ‘adequate, sustainable and safe’. The paper explores a series of questions and invites respondents to comment on matters such as (amongst others):
- Is there a need for a pension benefit guarantee system coordinated at EU level to address failures in defined benefit (DB) schemes and compensate for excessive losses in defined contribution (DC) arrangements?
- Is it viable to increase the protection provided by EU legislation when the sponsoring employer of a pension scheme goes insolvent? and
- Should the risk-based solvency regime set out in the Solvency II Directive apply to pensions?
The general consensus among the responses is that a uniform system would not be suitable, with Pensions Minister Steve Webb saying that the government did not believe that there is a ‘one size fits all’ model for pension systems across the EU. The Association of Consulting Actuaries (ACA) further highlighted a common opposition to ‘Solvency II being the “starting point” for further EU regulation of pension funds’ (as recommended in the green paper).
Solvency II (due to take effect on 31 December 2012) is a fundamental review of the capital adequacy regime for the European insurance industry. It will set out new, strengthened EU-wide requirements on capital adequacy and risk management for insurers with the aim of increasing policyholder protection. It is thought that if this capital adequacy regime is applied to UK DB pension schemes, it may result in more onerous reserving requirements.
The deadline for submissions closed on 15 November and the European Commission will now analyse the responses and decide how best to proceed.