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Jonathan Camfield, partner at the consultancy, said: "It is no exaggeration to say this has the potential to be catastrophic for DB pension schemes and equity markets in the UK. Total funding requirements could increase significantly – for example, by €575 billion – which could lead to company insolvencies as cash calls rocket."
Nonetheless, Camfield welcomed the fact EIOPA recognised the differences between pension schemes and insurance companies. EIOPA has suggested that one way forward might be to have a two-tier approach to funding pension schemes across Europe, with the implication being that the UK would be able to continue with something closer to its current regime, at least in the medium-term.
"However", Camfield added, "even if this were to be the case, EIOPA is recommending that a complex 'holistic balance sheet' would need to be produced for each pension scheme, showing the difference between this approach and a Solvency II-style approach, and also putting a financial value on things such as the strength of a sponsor's covenant".
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