Creating sustainable EU pension system a key priority

Creating a sustainable and adequate pension system across the European Union (EU) is a key priority, according to Gabriel Bernardino (pictured), chairman of the European Insurance and Occupational Pensions Authority (EIOPA).

Bernardino-Gabriel-EIOPA-2014

Speaking at the National Association of Pension Funds (NAPF) annual conference on 17 October, Bernardino also challenged pension scheme providers to provide simple, standardised products to help bring down costs and help stop misselling.

He said: “The UK’s courage to act shows that it pays off. The success of auto-enrolment is a good example of what can be done.

“Pensions will continue to change, and reforms are enacted to restore confidence.”

Part of that change is a pensions stress test, which EIOPA is preparing. This will look at costs and charges, default fund options and will also include a solvency assessment for defined benefit (DB) pension plans.

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.

Bernardino said that EIOPA has a duty to conduct the tests on both the insurance and pension sectors, but the pensions test will not mirror the insurance model.

He said: “Our aim is to develop a stress test framework that is appropriate and suitable for pension funds.

“For pension funds, there is no experience of running these stress tests for both DB and defined contribution (DC) pensions, and no way of analysing the direct transmission channels between pension funds and financial markets.

“We do not want to start the thinking with the opinion big pension funds are systemically important. This is not our starting point. We want to understand the market better and how the linkages are.”

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Once the data collection has taken place, the stress test will begin in 2015.