So much unnecessary legislation – so many battles, says the NAPF’s James Walsh
It is in the nature of trade association lobbying to win some and lose some.
But I am pleased to say the National Association of Pension Funds can claim some progress on all the main European Union and international issues on our radar over the past year.
The big issue, of course, has been the proposal to introduce new solvency rules for pension scheme funding. The EU’s own figures showed these could have increased UK defined benefit pension deficits by 50%, causing great damage to pension schemes and their sponsoring employers.
It wasn’t just the NAPF that raised objections: governments and stakeholders around Europe joined the chorus of concern.
As a result, European Commissioner Michel Barnier announced last May that he would not include the proposals in the new version of the Directive on Institutions for Occupational Retirement Provision. Instead, the new directive will focus on transparency.
The solvency rules have been postponed indefinitely
This means the solvency rules have been postponed indefinitely – or at least until the next internal market commissioner takes office in November. The second issue has been the proposed EU Financial Transaction Tax (FTT), to be introduced in 11 EU member states.
The catch is that the tax would apply when British pension schemes buy shares in companies or do business with banks based in the ‘FTT zone’.
The FTT enjoys plenty of political backing.
The NAPF encouraged the British government to challenge the proposed tax, highlighting the damage it would do to savers and pensioners, and it has been good to see our government’s legal challenge in the European Court of Justice playing a key role.
But beware – progress may be slow, but the FTT enjoys plenty of political backing.
A third concern has been the tackling the complex new requirements on over-the-counter derivatives trades, as introduced by the EU’s European Market Infrastructure Regulation (EMIR) legislation. Many schemes use derivatives to hedge their risks, and there are concerns that making the processes more cumbersome and costly could force schemes to reduce their hedging activity – potentially increasing the risk in the financial system.
Lobbying by the NAPF – and many allies, it must be said – resulted in an exemption for pension schemes from central clearing until 2015, with a potential extension until 2018. A fourth – and ongoing – issue is the Money Markets Regulation under consideration by the European Parliament.
There is still a concern that the types of money market funds most used by UK pension schemes would become too expensive
Again we are inching forwards: the latest draft of the Economic and Monetary Affairs Committee’s report responds to one of our key concerns by removing a proposed ban on independent rating of money market funds. This will be particularly helpful to smaller pension schemes, which do not have the resources to do their own in-house investment research.
But there is still a concern that the types of money market funds most used by UK pension schemes would become too expensive. Elsewhere, detailed liaison between the NAPF and HM Treasury helped to secure a helpful outcome over implementation of the US’s new Foreign Account Tax Compliance Act.
A UK-US agreement now makes clear that pension schemes will be exempt from what would have been a burdensome set of compliance obligations.
As you can see, that’s an awful lot of work, but the results are more positive than negative. The problem is that we will have to continue fighting many of these battles. A trade association’s work is never done.
James Walsh is Senior Policy Adviser, EU & International, National Association of Pension Funds