31 July 2012

EFRP response to EIOPA Consultation on Quantitative Impact Study

The European Federation for Retirement Provision's response discusses the technical specifications of the proposed QIS and shows that a lot of different and subjective assumptions have to be made in order to calculate the Holistic Balance Sheet (HSB).

The EFRP has submitted its response to EIOPA’s consultation paper on the draft technical specifications for the Quantitative Impact Study (QIS) of EIOPA’s advice on the review of the IORP Directive. The EFRP reiterates its opposition to the HBS model, as it is an unworkable supervisory tool for measuring long-term liabilities and investment horizons by IORPs.

The EFRP believes that the IORP Directive revision will not have the outcomes desired by the White Paper and the EU2020 strategy. It contains the risk of doing the opposite, namely reducing the adequacy of pension provision, which is of concern since recent pension reforms have mostly focused on preserving the long-term sustainability of systems rather than pension adequacy.

The EFRP welcomes the fact that some of the unique characteristics of IORPs are taken into account in the Holistic Balance Sheet (HBS) approach; yet, the proposed HBS model will be an unworkable tool for IORP supervision due to the huge complexity and subjectivity of the chosen assumptions. Other models for IORP supervision should also be taken into consideration.

The QIS as it is proposed in the consultation document, is not sufficiently comprehensive to serve as a basis for a revised IORP Directive. It will be very hard for EIOPA to come up with an adequate advice due to the very tight timeframe of EIOPA. The EFRP asks the European Commission to provide more time to EIOPA. A coherent, detailed process free of time pressure is needed to come up with a suitable prudential framework for IORPs.

The EFRP sees the revision of the IORP Directive as part of the broader pension reforms in the European Union, as envisaged in the White Paper - An Agenda for Adequate, Safe and Sustainable Pensions. Pension reforms in Member States generally put pressure on the 1st pillar pensions, so the 2nd and 3rd pillar pensions have to be the solution to address the adequacy of European pensions. However, the starting points in each Member State are different and the reforms are based on different approaches.

The aim of the EFRP is that Member States and EU regulations make it easier, not harder, for companies to set up and develop workplace pensions. Indeed,  EFRP urge the EC to recognise the comprehensive pension reforms going on in the Member States: if the costs of workplace pension provision go up through the IORP Directive revision, then the 1st pillar will have to carry more of the pension burden, but this is exactly the opposite of what the EU recommends.

Full response

© EFRP - European Federation for Retirement Provision