EU postpones Solvency II rules on pensions

Alice Murray
24 May 2013

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The European Commission has postponed a bid to apply Solvency II style rules to pension funds as part of the revised IORP Directive.

The decision to delay the possible implementation of Solvency II rules on pension funds was attributed to the need for a deeper understanding of the solvency of pension funds. The Commission said in a statement: "It is apparent that some funds, especially defined benefit funds, show significant deficits. Moreover, the future application of Solvency II to insurers will affect insurers who provide occupational pensions. This raises issues of fair competition. The European Insurance and Occupational Pensions Authority (EIOPA) has just carried out a study on the solvency of certain pension funds, which highlights the need to deepen our knowledge before taking decisions on any European initiative on solvency of pension funds."

Instead, Michel Barnier, the European commissioner leading the drafting of business regulation, has proposed that improvements be made regarding transparency and governance of occupational pension funds in the autumn.

The EVCA welcomed yesterday's announcement. "We have long argued that Solvency II style rules for workplace pensions are inappropriate and disproportionate. Such regulation would deter pension funds from investing in long-term investment vehicles such as private equity funds and damage Europe's economic recovery," commented EVCA secretary general Dörte Höppner.

"We hope that this encouraging development in pension fund regulation will be reflected in Solvency II, particularly regarding capital requirements for investments in long-term asset classes," she added.

The EU is still hammering out Solvency II rules, which have been in the works for a decade and were originally meant to take effect in late 2012. According to reports from earlier this week, the EU is nearing a deal on the insurance rules, designed to decide how much capital insurance companies must hold to act as a safety net against losses.