The European Insurance and Occupational Pensions Authority (EIOPA), which issued a consultation paper in June on the draft technical specifications for the Quantitative Impact Study (QIS), has been criticised by the actuarial and consultancy firm of Punter Southall, which says the plans are flawed.
Responding to the consultation, Punter Southall’s head of research, Jane Beverley, said: “We are very concerned at the limited scope and timescale for the QIS. Applying a holistic balance sheet based on Solvency II to defined benefit pension schemes could have massive consequences for the pension schemes themselves, their members, and the employers who sponsor those schemes, as well as for the European economy as a whole. These are issues that demand careful and considered scrutiny, not a six-week consultation.
“Insurers have had five QISs to refine how Solvency II should apply to them in practice. It seems bizarre that the European Commission [EC] should propose only one QIS for pensions, and that after only a six-week consultation, when many of the elements of the holistic balance sheet that are unique to pension schemes,such as the valuation of the sponsor covenant and assessment of the value of the Pension Protection Fund [PPF], have only just been put forward for discussion for the first time.
“Overall, the QIS will fail to do what it says on the tin (i.e. to quantify the impact on pension schemes) because it will not cover the actual implications if the holistic balance sheet does not balance – will employers have to fund the gap, and, if so, over what time period? All this QIS can do is to produce some meaningless numbers that will inform no-one about the real impact that a Solvency II style regime could have on pensions,” concluded Beverley.
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