Europe has dropped plans for new pensions solvency measure
The European Commission announced on 23 May 2013 that the new directive on occupational pension schemes will focus on pension scheme governance and disclosure rather than on funding. The technical work by the Commission on the issue of pension scheme solvency will, however, continue.
In 2012 the Commission began a review of the 2003 Pensions Directive. The Commission said that it wished to apply the stringent governance and funding regime which applied to insurance companies under Solvency II to institutions for occupational retirement provision (IORPs), which include occupational pension schemes. As part of the review the European Insurance and Occupational Pensions Authority conducted a qualitative impact study. This study showed that the proposed new solvency measure could increase the funding deficits of UK defined benefit pension schemes by many billions of pounds.
Terry Saeedi, head of pensions at Gordons, said that this is a pragmatic and sensible decision by the Commission which will be widely welcomed. The news will be a particular relief to employers with defined benefit pension schemes. The question of pension scheme solvency has not, however, been shelved for good. It is an issue which the Commission may return to in the future.