Whilst much of the revised draft of IORP II is welcome to the pensions industry, the impact of the introduction of the new power for the Regulator in the transferring State to block the transfer of assets and liabilities will kill the nascent Defined Benefit (DB) cross-border market, says the Association of Consulting Actuaries (ACA). Under article 13(5) of the agreed draft this new power is introduced providing the Regulator with carte blanche to refuse to approve the transfer if they believe for whatever reason that in their opinion beneficiaries' security would be threatened.
Contrary to common belief, a number of multinationals have successfully established cross-border DB pension funds under the existing IORP Directive (which does not allow such a veto from the transferring Regulator) typically involving Belgian, Irish and Dutch sections and billions of Euros of assets have already or are currently being transferred.
Paul Kelly, Chairman of the ACA International Committee commented:
"It is perverse that a Directive, which has as one of its objectives the encouragement of cross-border pension plans should, as currently drafted, make it extremely difficult to do so. Multinationals will be extremely reluctant to invest the time and effort in working with all the stakeholders to proceed with the transfer if the transferring Regulator can simply refuse to transfer on the grounds of their opinion.
“It also means that it will be more difficult for multinational companies to sustain existing mature DB plans without the tool of combining these together.
“It appears that this nascent market has been the victim of EIOPA's push for harmonised funding and the nationalistic concerns of individual Regulators.
“Turning to the current Holistic Balance Sheet, we consider that the existing funding framework combined with the Risk Evaluation for Pensions, as currently proposed, provides a prudential regime that is market-consistent and risk based, providing an objective and transparent view of the financial situation of IORPs and promoting proper risk management.
“The proposed Holistic Balance Sheet is not practical and does not improve on the existing regime. Further, it is likely to have a detrimental impact on the level and type of retirement provision provided in the UK as well as more widely on the European economic environment. We recognise that it may be possible to simplify the holistic balance sheet, as outlined by EIOPA, however, we do not support its implementation, in any form."
The ACA response is available at www.aca.org.uk (see: ‘consultation response’ page) |
