The EU and the application of Solvency II to Pensions – the role of the Pensions Regulator

1. The EU and the application of Solvency II to Pensions – the role of the Pensions Regulator Will Price – The Pensions Regulator Actuarial Profession Solvency II Open Forum 4 March 2008

2. The decision making process • Stage one: Commission proposal • Stage two: European Parliament and Council • Stage three: Act adopted • Stages four and five: Implementation and monitoring compliance

3. Future Plans for Pensions Solvency • Pressure • Recent comments, call for advice? • “a very strong business case would be required before we start shifting Solvency II rules to pension funds, and frankly, I would be surprised if there is such a case” (Charlie McCreevy) • Broad Consultation • UK effect (Punter Southall) • “Moving to a solvency regime could cause an increase in liabilities of around 90%”

5. CEIOPS • Level 3 of the Lamfalussy process • TPR and FSA represented in CEIOPS • Key work program: • Review of the IORP • Solvency for pensions • Cross border provisions

6. Occupational Pensions Committee • Initial review of key aspects of the implementation of the IORP directive • Solvency Sub-Committee (SSC) • Basis of the work • Report on Technical Provisions and Security Mechanisms • Future work

8. Two archetypes in Europe • Article 17 • Buffers • Employer support • Contingent assets • Guarantee Funds

9. Buffers Netherlands Austria Belgium (circa 75%) Denmark Germany France Sweden Sponsor backed UK Ireland Luxembourg Belgium Malta Portugal Two archetypes in Europe

10. Stakeholder involvement • Departmental stakeholders • Industry/commercial stakeholders • European/CEIOPS stakeholders

11. Source: OECD

12. Questions?