Solvency II Near Miss!
Well down here on Planet Pensions the dinosaurs are heaving a sigh of relief. It was a close run thing, but the Solvency II comet apparently narrowly missed the planet last week and our final salary occupational pension schemes (aka the dinosaurs) can breathe again. Mass-extinction has been narrowly avoided once again. Mind you, the IASB comet thatís suddenly veered this way has got everybody looking skywards again with that Ďend of the worldí look on their faces. Itís getting hairy up there; itís one after the other these days isnít it?
Solvency II, in case you havenít been paying attention to your friendly neighbourhood BeeHive lately, requires insurance companies to strengthen their capital reserve requirements; itís a European thing thatís caused a lot of corporate belt tightening across the continent. Some in Europe have been saying that the same stringent solvency requirements should apply to defined benefit Occupational Pension Schemes Ė hence the doom and gloom dinosaur-wise.
Well the good news is that a guy called Charley McCreevy, the European Commissioner for the Internal Markets and Services Directorate no less, said last week that the EU will only apply the insurance company solvency rules to pension funds if "there is a clear case for doing so."
He went on to say "I believe that further work is needed here before we can commit ourselves to any specific regime. Stakeholders will have an opportunity to provide us with their views. But 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. I have no intention of sponsoring proposals that would risk closing down defined benefit pension schemes."
Well, "Phew!" and "Double Phew!" to that.
"But what about the IASB comet?" I hear you say. "Whatís that all about?" Itís all about international accounting standards is what itís about, as you ask. International accounting standards are what the International Accounting Standards Board is into as you can probably tell from the name. Itís its job to suggest how companies disclose their liabilities amongst other things. Final salary (or defined benefit) pension schemes are bracketed in the Ďliabilitiesí column on company accounts given the unknown and imprecise nature of future costs. In a nutshell there are some new proposals from the accountancy standards people that have got the dinosaurs running for cover again. Itís still some way out in space at the moment, still at the Ďproposalí stage, so weíll keep our telescopes trained on it for now and let you know if it looks to be on an earthbound trajectory.
In the meantime keep your heads down and remember thereís no need to worry about these things unless it suddenly goes very dark and everybody around you starts running about all over the placeÖ..
11 February 2008
Source: IPE website, News 8 February 2008.
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