Pension executives fear the EC will force schemes to match liabilities with expensive sovereign bonds. They say proposed supervisory controls would intensify the risk aversion displayed by schemes and add to costs.
Uncertainty over the implications has led to widely varying estimates for the extra costs, ranging from at least £300 billion, according to the National Association of Pension Funds, to as much as £1 trillion, according to Towers Watson.
Last March, the EC put forward the idea that pension schemes’ liability measures should be toughened in line with Solvency II, to put them on a level playing field with insurers. It asked the European Insurance and Occupational Pensions Authority to prepare a consultation paper.
Schemes said the consultation period of just over two months, which ended last week, was too short to permit a considered reply to the 517-page paper published last October. The UK’s Financial Reporting Council said: “Despite its length, the consultation paper still does not set out proposals clearly enough for us to assess the impact of possible changes on pension schemes, their beneficiaries and their sponsors. This is compounded by the absence of a full impact assessment.”
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