05 November 2013

Responses to EIOPA's Discussion Paper on Sponsor Support Technical Specifications: AEIP, NAPF, PensionsEurope, USS

AEIP

According to the European Association of Paritarian Institutions of Social Protection (AEIP), the regulator’s placement of IORPs at the back of creditor queues upon insolvency could "pose issues for the comparability of the holistic balance sheet (HBS) results across Europe", as individual Member States regulate recoveries differently.

The association also warned that the default probabilities the regulator would employ – based around credit ratings – would often be influenced by liquidity problems. "This does not always mean there is insolvency", it added. "Using these probabilities of defaults in combination with no allowance for recoveries is too severe. AEIP also still questions whether a proper methodology for industry-wide IORPs can actually work, given the difficulties in assessing the strength of an industry rather than a single company."

The AEIP also sided with PensionsEurope in urging the regulator to consider the macro-economic impact of its HBS proposals, saying the threat of the new balance sheet approach could be discouraging employers from launching new IORPs.

Full article (IPE registration required)

NAPF

The NAPF says that the EU should ensure the regulatory system supports the extension of workplace pensions, rather than increasing regulatory burdens for existing pension schemes that employers have set up voluntarily. This should include extending the use of Institutions for Occupational Retirement Provision (IORPs) more widely across the EU. 

However, given that EIOPA is continuing with this work, the NAPF has set out how EIOPA should radically alter its proposals. It argues that the EU is approaching this work in the wrong order, saying that the first step should be to establish whether the Holistic Balance Sheet would be used as the basis of a new funding regime. It advises that the EU should leave pension protection to Member States under the principle of subsidiarity, as long as they comply with EU legal requirements. It argues that there is no Single Market or freedom of movement case for a harmonised EU-wide system of workplace pension regulation. 

Press release

PensionsEurope

PensionsEurope acknowledges that EIOPA intends to take proportionality into account through a simplified alternative approach to value sponsor support. However, the approach is deemed far too simplistic and only provide methodology to measure sponsor support with a relatively simple "1-1-1-1" combination (1 sponsor – 1 IORP - 1 pension promise - 1 country). The methodology to value sponsor support with combinations such as multi-employer plans, industry-wide plans, non-profit organisations, public sector IORPs, sponsors with multiple IORPs or IORPs for self-employed people is much more complex and remains understudied, unclear and burdensome.

PensionsEurope warns that many IORPs – especially small and medium-sized IORPs - will not be able to make the calculation. Furthermore, PensionsEurope emphasises the negative consequences that this approach would have on the sponsor companies in terms of investment, job creation and provision of occupational pension schemes.

Full response

USS

The Universities Superannuation Scheme (USS) said evaluating the support of its higher education sector sponsors would require a "very significant" use of resources, and urged the regulator to conduct further work on potential methodology. USS said it was unclear how the proposals would "deliver any extra insight" on sponsor stability compared with the existing system.

It also rejected proposals by EIOPA to adopt asset or income covers – which the regulator argued in the discussion paper were already successfully deployed by banks to assess creditworthiness – as a means of gauging sponsor strength.

Full article (IPE registration required)

Link to original consultation