Defined benefit schemes across the country breathed a sigh of relief on Thursday after the European Commission bowed to increasing pressure and chopped solvency requirements from its upcoming IORP II directive.
Commissioner Michel Barnier said there was sufficient consensus on governance and transparency issues for a directive – still delayed until the autumn, mind – that he hopes will encourage the evolution of a working internal European pensions market.
Reflecting the view of many, Francois Barker, head of the pensions group at law firm Eversheds, described the news as a “victory for common sense” to be welcomed by DB sponsors who had been “dreading the day” new funding requirements were implemented.
“EC decision to postpone Solvency II for pensions is good news,” tweeted Legal & General’s pensions strategy director Adrian Boulding, “but heightens need for trustees to ensure employers fund schemes adequately.” Quite.
Among the increasingly inflated numbers being thrown about the industry on the prospective cost of this reform, it was perhaps easy to forget the reasons behind it.
“I already call on countries which have undercapitalised pension funds to take the necessary measures without delay,” Barnier underlined, adding Europe must “face up to the weaknesses” in some occupational pension funds.
Elsewhere in this issue, we see the Pensions Regulator’s new statutory objective to take into account sustainable employer growth is already having an effect on British Airways (see page three), where trustees have communicated with members on this step change.
Those making the argument for boosting employer funding to schemes might just have a more difficult argument to make without a tougher UK or European regulator playing the bad guy.
It would be a shame if the combined effect of two sensible measures had an adverse impact on schemes’ ability to secure the funding they need.
But it is undoubtedly an easier problem to grapple with than any framework that, in the commissioner’s own words, might “penalise national systems which work well” and “harm the ability of pension funds to play their role as long-term investor”.
Ian Smith is editor of Pensions Week. You can follow him on Twitter @iankmsmith and the team @pensionsweek
