Towers Watson has today warned that a European body of pension supervisors could be financed by pension schemes, insurance companies and taxpayers.
The ECON has published a draft report1 which recommends granting the EIOPA an independent budget. This would be “funded by the contributions from market participants and the Union budget”.
Dave Roberts, a senior consultant at Towers Watson, said: “’Market participants’ is code for pension schemes and insurance companies, while ‘the Union budget’ means taxpayers.
“In the case of defined benefit schemes, additional costs would have to be met by the employers who are responsible for ensuring that the scheme has enough money left to pay the benefits that are due. In most defined contribution schemes, the cost would ultimately come out of pension savers’ retirement pots.
“The sums that each scheme needs to find may not be huge but this goes against the grain of the Government’s intention to make defined benefit schemes less burdensome for employers and to cap charges in defined contribution schemes because ’seemingly small variations in charges can result in a considerable difference in people’s final retirement savings’”
ECON’s recommendation follows comments made by the Chairman of EIOPA, Gabriel Bernardino, in May2, when he called for partial financing of EIOPA through a levy on the industry.
EIOPA’s budget for this year is €18.8 million3, 60 per cent of which comes from national supervisors (and so, indirectly, from the pension schemes and financial service companies who pay levies to them). EIOPA has been pressing for greater supervisory powers and is continuing to work on possible reforms to solvency standards for defined benefit schemes, while the ECON report also supports ‘enhancing [EIOPA’s] investigatory powers’.
Dave Roberts said: “An expanding workload for EIOPA is likely to mean an expanding budget and ECON’s proposals would make it easier to get pension schemes and insurers to pay for this. Even if the idea was only to cut out the middlemen and make pension schemes pay EIOPA directly, it would still give a European regulator a direct claim on pension fund assets for the first time and open the door to higher payments in future. The National Association of Pension Funds recently called for a single regulator of UK pensions4. It’s unlikely that the NAPF had EIOPA in mind, but EIOPA might think differently.”
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