The QIS was undertaken at the request of the European Commission to inform stakeholders on the quantitative impact of the different options for the holistic balance sheet approach put forward in EIOPA’s Advice on the Review of the IORP Directive.
The study is the first of its kind in assessing the financial situation of EU pension funds in a comparable and comprehensive way. IORPs had to value all assets and liabilities on the holistic balance sheet on a market-consistent basis. In addition, IORPs were asked to recognise the value of sponsor support arrangements, pension protection schemes and benefit adjustment mechanisms available to them. As such, the outcomes provide a transparent view in how far occupational pension promises are supported by financial assets and security mechanisms and in how far benefit adjustments are expected to occur.
The report shows a wide dispersion in impacts of the holistic balance sheet, ranging from surpluses in some Member States to large shortfalls in other Member States. EIOPA is convinced that the holistic balance sheet approach can contribute to the sustainability of pension funds and the protection of current as as well future generations, in line with the EU policy objective to provide citizens with adequate, sustainable and secure pensions.
The QIS results reinforce the need to continue working towards a European regulatory regime for pension funds that is market-consistent, ensuring a comparable and transparent assessment of the financial situation of IORPs; and risk-based, enhancing risk management, including sound asset and liability management techniques. The ultimate objective must be a transparent and comprehensive assessment of pension provision which allow for informed understanding and management over the long term.
Gabriel Bernardino, EIOPA’s Chair: “This first QIS is an important step in developing a better understanding of the financial position of EU pensions. The ability of many IORPs to provide benefits is under significant pressure as a result of historically low interest rates, market volatility, improving longevity as well as economic pressure on participants and sponsoring employers. The holistic balance sheet which underlies this QIS is an opportunity to develop a risk-based measurement of all of the elements which affect the cost of providing benefits as well as all mechanisms which fund those benefits or contribute to their security.”
The QIS confirmed the need for further technical work, which EIOPA is fully committed to undertake. Together with this final report EIOPA has published a discussion paper to improve the technical specifications for the valuation of sponsor support.
Full press release
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