By James Walsh
I have just come from breakfast with a group of pension schemes and one of the key areas on which they wanted an update was EU pensions policy.
And no wonder – because there are some hot issues up for debate by pension schemes right across Europe at the moment, not least in the UK.
Last month, EIOPA launched its pension stress tests and quantitative assessment of its plans for solvency for occupational pension funds – disappointing given the European Commission put the whole project on the back burner in May 2013.
EIOPA’s hope is that a future European Commission might pick up this particular baton. No doubt it sees the stress tests as potentially strengthening the case with insights into the risks and vulnerabilities in the occupational pensions sector. But it’s interesting that EIOPA’s own summary of responses to the previous round of consultation did not identify any external support for this project.
The NAPF continues to urge EIOPA to set this project aside, but recognises that, since EIOPA is determined to press ahead, then it’s important for the UK to provide an accurate response. So we are working to help the UK Pensions Regulator gather the required data, while being careful not to impose any additional burden on UK pension schemes which are already very busy implementing Freedom and Choice and many other reforms.
But that’s not the only activity in the European pensions space at the moment.
Arguably the biggest issue currently for institutional investors in Europe is the plan to develop a Capital Markets Union (CMU) – a true single market for capital for all of the 28 member states, helping re-energise Europe and foster growth.
In February, Jonathan Hill, European Commissioner for Financial Stability, Financial Services and Capital Markets, launched a Green Paper outlining his vision of what a CMU might look like. The NAPF has been fully supportive of this paper, as we believe pension funds and pension savers have much to gain from proposals that aim to make it easier to invest in the long-term and across borders.
In our response, we highlighted that for the CMU project to succeed, governments across Europe, and the EC, must make available investment opportunities that offer the type of risk and return profile that pension funds need to meet their future liabilities and pay members. Infrastructure, for example, is one such asset class that can offer low risk, long-term investment, providing inflation-linked cash flows that can form part of a pension scheme’s liability matching asset allocation. However, historically this asset class has been difficult and expensive for individual pension funds to invest in on their own. Policymakers should focus on creating a stable regulatory and fiscal framework to ensure a clear pipeline of future investment opportunities, such as infrastructure, is available.
Fundamentally, policymakers should ensure that all aspects of EU policy, and all EU institutions, are aligned with the policy on CMU.
This is why the PensionsEurope 2015 conference taking place this month in Brussels (24 June 2015) is such an important date in the diary. It will be an excellent opportunity for pension funds and their advisers across Europe to come together to discuss the most pressing issues currently facing their funds and pension savers.
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