The U.K. pension industry has expressed disappointment in the European Commission's replacement for the European pensions directive, which is known as the Institutions for Occupational Retirement Provision, published Thursday.
It was anticipated that the update would include the removal of a requirement that cross-border pension plans had to be fully funded at all times. Two leaked drafts of the new directive did not include this requirement, but the final version, published Thursday, remains unchanged.
“As well as casting doubt on the commission's assertion that one of the main objectives for the directive is to fully reap the benefits of the single market for occupations pensions by removing obstacles to cross-border provision of services, this could create significant funding problems for some schemes in the event of Scotland voting in favor of independence from the rest of the U.K.,” said David Roberts, a senior consultant at Towers Watson, in a news release.
The EC proposes that IORP II come into effect starting in 2017, which consultant Lane Clark & Peacock said indicates that for the U.K. a Pensions Act 2016 might be necessary in order to implement the EC changes in the U.K.
The proposal includes an increase in governance requirements for pension funds, which LCP said would be costly to implement.
“Whilst the EC has kept their promise and not imposed immediate insurance-style funding requirements on U.K. pensions, there are a number of potential nasty details in their proposals which pension schemes will be forced to deal with,” said Jonathan Camfield, LCP partner, in a statement responding to the proposal.
Mr. Camfield said the most concerning point is the potential for the European pensions regulator, the European Insurance and Occupational Pensions Authority, to “impose onerous additional disclosure requirements on U.K. pension schemes, including disclosure of their finances valued as if they were an insurance company,” he said in the statement.