EIOPA launches pension stress tests

The European Insurance and Occupational Pensions Authority (EIOPA) has launched a pensions stress test and quantitative assessment on solvency for Institutions for Occupational Retirement Provision (IORPs). 

Bernardino-Gabriel-EIOPA-2014

The stress tests, which EIOPA started preparing in 2014, will cover both defined benefit (DB) and defined contribution (DC) pension schemes.

The first of these will look at costs and charges, default fund options and will also include a solvency assessment for defined benefit (DB) pension plans.

It is aimed at assessing the resilience of the IORPs and their pension schemes to adverse market scenarios and a longevity scenario.

The stress test is designed to provide insight and raise awareness of the occupational pensions’ sector risks and vulnerabilities, while the quantitative assessment aims to gather data on potential uses of the holistic balance sheet and to support advice to the European Commission on EU solvency rules for IORPs.

Data will be collected on Institutions for Occupational Retirement Provision (IORPs) in the EU’s largest pensions markets, analysing more than 10 years of investment data.

The exercise will be conducted in 17 European countries, including the UK.

Gabriel Bernardino (pictured), chair of EIOPA, said: “Pension funds are already experiencing a challenging environment with low interest rates and rising life expectancy.

“A key vulnerability for the occupational pensions sector is a prolonged period of low interest rates combined with a fall in asset prices due to a re-appraisal of risk on financial markets.

“The stress test will retrieve valuable information on the sensitivity of IORPs, sponsoring undertakings and members and beneficiaries to such a scenario.”