Solvency II for pensions is unlikely

VotingEurope is unlikely to impose solvency rules for pension schemes even though commissioner Michel Barnier says they are still on the agenda, because the five major countries opposing the rules control nearly enough votes to block them.

Analysis from JP Morgan Asset Management says Germany, the UK, the Netherlands, Belgium and Ireland, which together control 90 votes, would succeed in blocking the rules if only one other country joined in voting against them.

This position is unchanged after Croatia joins the European Union on July 1, says Paul Sweeting, European head of strategy at JP Morgan Asset Management.

Once Croatia joins, “the number of votes needed for a blocking minority increases slightly, to 93”, he says. “However, even the smallest country in the EU, Malta, has three votes, so it will be no more difficult than before to block this legislation.”

Rules on solvency requirements were the first pillar of the proposed Institutions for Occupational Retirement Provision (IORP) directive. This pillar would be expected to mirror Solvency II rules for insurance companies, which will impose tough capital and risk management requirements, involving mark-to-market accounting, once they come into effect on January 1, 2014.

Barnier recently backed down on the solvency requirement for pensions and said the first pillar would not be implemented as part of the second version of the IORP directive due to be presented in autumn. He said he still hoped to address solvency rules once more complete data was available.

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