Bernardino champions Europe-wide occupational DC framework

There should be a Europe-wide framework governing occupational defined contribution (DC) pension funds, Gabriel Bernardino has suggested.

Speaking at the European Insurance and Occupational Pensions Authority’s annual conference in Frankfurt, the supervisor’s chairman said any such framework would be able to reduce costs by operating on a cross-border level.

“At an EU level, while recognising the high sensitivity around pensions discussions, a further important step would be to design a simple and transparent EU framework for defined contribution occupational schemes.

“This framework should be capable to take full advantage of the potential of the EU internal market by providing a cross-border platform that would reduce costs, support long-term funding of the EU economy and ultimately deliver better pension outcomes.”

The new plan would be in addition to EIOPA’s vision for a pan-European personal pension product, which has been criticised by the Dutch government.

The chairman’s comments come after PensionsEurope released a paper outlining key design principles for what it regards as modern DC, focusing on member behaviour, adequacy of the accrued pension pot’s size and risk-sharing.

Bernardino also suggested new tools might be needed to ensure constructive dialogue between social partners involved in defined benefit (DB) funds, and that DB was becoming “more and more a legacy issue”

“There is a need to build appropriate incentives for a proper dialogue between employers and employees on their long-term sustainability,” he said. 

However, not wishing to underplay the importance of properly valuing liabilities, he added: “This important dialogue should not be based on valuations and risk assessments that deny economic reality.

“It will not contribute to a better risk management, will fail to reflect the true risks the different stakeholders are running and will help to preserve schemes that are clearly unsustainable, postponing the taking up of measures in due time.”

He warned that maintaining such unsustainable schemes risked leading to a reduction in benefits and intergenerational conflict, and could cause reputational damage to the pensions sector.