The National Association of Pension Funds (NAPF) has said that the EU’s assessment of a Solvency II type regime for pension funds is flawed. It said the proposed regulations could damage pensions and businesses for decades, and call for more work on the proposals. NAPF chief executive, Joanne Segars, commented: “This study was a good opportunity to test the EU’s proposals, but it has completely failed to do so. The Holistic Balance Sheet does not take into account the complex structures of today’s companies and pension schemes. Valuing an employer’s covenant is a new and challenging task, and we need further work to find the correct way to do this. Pension schemes were given far too little time to carry out complex calculations, and the costs involved in running them were high.
This has stopped many pension schemes from giving feedback.” She added: “A new directive based on a Solvency II regime would have serious consequences for UK pensions and businesses. Imposing extra costs on pension schemes would force more of them to close, and could undermine jobs and investment at a time when the economy is struggling. The stakes are too high and we cannot rush things through.”
The NAPF also said many of its members said they did not have time to respond, and that it was prohibitively expensive to do so. One NAPF member said it would have faced a £15,000 bill to commission consultants to run the test. In addition, the NAPF said a Solvency II regime would add at least another £300 billion to pension liabilities, which could lead companies to close their pension schemes.