27 Mar 2014: EC postpones holistic balance sheet
The European Commission has published its long-awaited revisions to the directive on occupational pensions.

As had been expected since an announcement in May 2013, the draft Institutions for Occupational Retirement Provision (IORP) II Directive did not contain the so-called ‘Solvency II for pensions’ requirements which would have introduced a pensions solvency regime across Europe.  This included a holistic balance sheet whereby the strength of the covenant was converted into a capital value.

Although the original solvency measurement proposals met considerable opposition they have not been dropped as such and are likely to be revisited at some point in the future.

Argyll comment:  While we appreciate presenting the covenant quantitatively as a capital value might provide a useful comparison mechanism we are not convinced that this is ultimately helpful.  At the core is a valuation of an income stream from the employer, the size of which is subject to a wide variety of factors that cannot easily be modelled or predicted over the duration of a recovery plan. 

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