16 November 2006

IPE: CEIOPS conference - Siemens wary on IORP

Technology giant Siemens, which operates several pension funds across Europe, says that contrary to its goal, the EU directive on occupational pension funds will not enable it to create a single European vehicle.

¡°We welcome the EU pension fund directive, but as it does not resolve the different social and tax laws of the member-states, we are not in a position to create a single European pension plan,¡± said Benedikt Kutschera, a Siemens official who handles pension advisory and investment management for the group.

¡°The reason is that remaining complexity caused by the different laws nullifies any benefits we could realise via economies of scale,¡± Kutschera told the annual conference of CEIOPS, the Committee of European Insurance and Pension Supervisors, in Frankfurt today.

Another important drawback of the directive was that it required defined benefit plans to be fully-funded at all times.

Last September, Siemens created an external pension fund, known as a Pensionsfonds in German, to fund up to ©¿bn in pension liabilities. Following the EU pension fund directive of last year, Siemens¡¯ Pensionsfonds could be used as the basis for a single European pension fund.

But Kutschera said that due to the constraints of the directive, formally the Institutions for Occupational Retirement Provision, Siemens was considering an ¡°asset-pooling solution¡± for its various European pension plans.

¡°The plans would continue to exist, but they would invest in a common pool,¡± he said. Kutschera also put the total pension liabilities of the Siemens¡¯ group at ©Ëbn, adding that these were set against ©Ébn in assets.

Separately, CEIOPS chairman Henrik Bjerre-Nielsen told an afternoon news conference that he expected the European Commission to consult the body in 2008 on whether Solvency II should be applied to pension funds. Solvency II, which aims to create a more risk-related solvency model for European insurers, is to take effect from 2010.

Nielsen acknowledged that while he personally backed extending Solvency II to pension funds, ¡°there are some at CEIOPS who are opposed to this¡±.

Bjerre-Nielsen also said he did not share the opponents¡¯ concern that DB schemes would suffer if Solvency II were applied to pension funds.

'I can't say for sure how the scheme would affect capital ratios, as we are still in the process of calibrating it for insurers. I don't, however, that you can say it automatically means stricter solvency requirements for them,¡± he told journalists.

© IPE International Publishers Ltd.