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EU targets pension scheme risk
04 January 2012
The European Commission could apply draconian funding standards to defined benefit pension schemes, modelled on Solvency II. It could lead to mass scheme closures and impact equity markets, writes Stephanie Baxter
The review of the Institutions for Occupational Retirement Provision (IORP) directive could have a severe impact on private pension funds and equity markets, according to pension consultancy firms.
Ever since the European Commission announced it could use Solvency II as a template for the IORP revamp, there has been fear that pension funds would be subjected to similar rules as insurance firms – meaning defined benefit (DB) pension schemes would need to radically increase funding levels on an ongoing basis.
Many pension schemes and consultants, particularly those in the UK, have spoken out against the proposals and have called on European regulators to reconsider.
While several EU countries have DB schemes, such as the Netherlands, UK schemes are particularly far away from Solvency II equivalent standards. Many EU countries do not have DB schemes, favouring defined contribution (DC) schemes that are unaffected the proposals.
The European Insurance and Occupational Pensions...
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