The study is the first of its kind in assessing the financial situation of pension funds in a comprehensive and comparable way. The QIS tested the various options for the holistic balance sheet approach that EIOPA proposed in its advice to the European Commission on the Review of the IORP Directive.
The aim of the holistic balance sheet approach is to capture the wide variety of occupational pension systems in the different Member States in a single, European prudential regime. I would like to stress that it does not want to interfere with national social and labour law nor with the prerogative of employers or social partners to decide on the contents of pension schemes. The holistic balance sheet allows pension funds to recognise the value of all security and benefit adjustment mechanisms available to them.
EIOPA’s advice also recommended that assets and liabilities need to be valued on a market-consistent basis. In my opinion, market-consistency is an objective measure that allows for a transparent and realistic assessment of the financial position of pension funds. All in all, I believe the holistic balance sheet is able to provide a comprehensive and comparable view in how far occupational pension promises are supported by financial assets, sponsor support and pension protection schemes and in how far benefit adjustments are expected to occur.
The QIS outcomes show that the overall impact of the holistic balance sheet approach varies widely between participating countries. In my view, two important lessons can learned from this first QIS:
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First, the impacts range from surpluses for IORPs in some Member States to large shortfalls for IORPs in other Member States. This clearly shows that the minimum harmonisation approach of the current IORP Directive has resulted in large differences in the protection of members and beneficiaries across Europe.
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Second, the outcomes reveal that pension funds dispose of vulnerabilities in different places.
In the coming months, EIOPA will set out a programme of work to improve definitions and methodologies for assessing the holistic balance sheet. The programme will be based on EIOPA’s own timelines and will allow sufficient time for the input from stakeholders. My aim is to present the next Commission with further tested technical proposals for a European risk-based prudential regime that appropriately reflects the specific reality of pension funds.
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