The European Commission has published a consultation paper on the harmonisation of solvency rules for pension schemes.

The draft Solvency II Directive proposes reform of the insurance industry, including funding requirements. Concerns had been raised that these could apply to all pension schemes currently regulated by IORP (implemented in the UK mainly by the Pensions Act 2004), but the position now is that most pension schemes will fall outside the scope of Solvency II.

The consultation asks whether Solvency II should cover cross-border schemes and "regulatory own funds". Both types of scheme have onerous funding requirements: cross-border schemes must be fully funded at all times; regulatory own funds must always hold additional assets above the aggregate of the scheme's technical provisions. Regulatory own funds (which are fairly unusual in the UK) are broadly undertakings which underwrite death, disability or longevity risk without involving the sponsoring employer, guarantee an investment performance or guarantee a level of benefits.

If anyone should want to undertake further background reading on Solvency II, a set of documents can be found on the Treasury website.