Bringing you live news and features since 2013
Bringing you news, views and analysis since 2013
Information

9558

EVCA update on proposed reforms to European pension system  

RELATED TOPICS​

The European Insurance and Occupational Pension Authority (EIOPA) has issued their technical advice to The European Commission on a proposed review of the Institutes for Occupational Retirement Provision (IORP) Directive. This is a technical piece of advice to which the EVCA and many other organisations, including pension schemes and their associations, submitted responses to the draft on January 2nd 2012.

The European Commission is due to issue a White Paper on a series of proposed measures to: “Ensure an adequate and sustainable retirement income for EU citizens now and in the future”. This will include a commitment to review the current IORP Directive.

Klaus Bjorn Rhune, Chairman of the The European Private Equity and Venture Capital Association (ECVA) Limited Partners Council and Partner, ATP Private Equity Partners, says: “Europe’s ageing population and low-growth economy have created a pensions time-bomb in Europe. The EU is right to focus on this issue but making it too costly to invest in long-term growth through say, private equity, venture capital or infrastructure is clearly not the way to defuse this bomb. In fact, by redirecting investment away from growing companies, it could make a bad situation much worse. A rigorous impact assessment is essential.”
 
EVCA welcomes proposals by the European Commission to review Europe’s retirement provision. With an ageing and increasingly mobile population, it is important that Europe’s pension regime is fit for purpose.
 
Included in the White Paper will be a proposal to review the IORP Directive. This review currently seeks to apply similar capital adequacy-based regulation to pension funds as will be applied to insurance firms under Solvency II.  
 
Solvency II rules will redirect investment towards lower return, fixed income assets such as Government bonds, away from equity and growth asset classes such as private equity and infrastructure. This is because insurers’ capital requirements must be calibrated to the value at risk, marked to market, over a 12 month period.
 
This effect is further exacerbated by exaggerated risk weights attached to private equity, that fundamentally misinterpret the risk-reward ratio of this long-term, value-enhancing asset class.
 
Imposing Solvency II requirements on pensions will effect occupational pension schemes abilities to meet their long-term liabilities and invest, through private equity and venture capital, in SMEs, innovation and growth.
 
The proposals have the potential to vastly increase the cost of pension plans for millions of Europe’s employees, reduce their retirement incomes and undermine investment at a crucial time for Europe.
 
This is why trades unions, employers, pension funds and the EVCA have all raised serious concerns and asked that the European Commission carry out a thorough impact assessment on the effect of this proposed regulation on both retirement provision and the wider effect on the economy.
 
The next key event in the IORP Directive process will be a European Commission hearing on 1 March, 2012.
 
 

Latest News

Irish domiciled funds surpassed EUR4.3 trillion AuM (Assets under Management) at end-March 2024, a 15..
New analysis by London-based Nickel Digital Asset Management reveals 38 listed companies with a combined..
Bloomberg has announced that for the first time, its proprietary Bloomberg Second Measure (BSM) transaction..

Related Articles

Global ESG Investing
On May 15 Florida’s Republican Governor Ron DeSantis signed legislation that furthers his ongoing campaign to oppose the role of climate change and ESG factors in state policymaking...
On May 15 Florida’s Republican Governor Ron DeSantis signed legislation that furthers his ongoing campaign to oppose the role of..
Trends
The trend to buyout among the UK’s smaller defined benefit (DB) schemes continues with a slew of new sub GBP100 million deals announced this month alone...
The trend to buyout among the UK’s smaller defined benefit (DB) schemes continues with a slew of new sub GBP100..
Different flavours
In what is believed to be the first survey of its kind in the UK market, Nedgroup Investments, the investment-led, multi-boutique global asset manager with over USD20 billion under management, recently undertook a survey with 204 UK investment professionals, seeking insights into their perceptions and attitudes towards boutique asset managers...
In what is believed to be the first survey of its kind in the UK market, Nedgroup Investments, the investment-led,..
UK map
UK local government pension schemes (LGPS) are leading the charge on investment in private markets issuing tenders set to be worth billions of pounds in the coming years...
UK local government pension schemes (LGPS) are leading the charge on investment in private markets issuing tenders set to be..
Subscribe to the Institutional Asset Manager newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by