EUROPE - The Investment Management Association (IMA) has endorsed the idea of a pan-European pension wrapper in its submission on the European Commission (EC) Green Paper on pensions.

The organisation's submission also stressed that any mitigation of risk would lead to higher costs and that policy intervention would only benefit schemes if no "catch all" approach was adopted, especially when examining prudential regulation.

Jonathan Lipkin, the IMA's head of research, said the most likely shape for a European pension wrapper would be a defined contribution structure.

"It is very, very difficult to see how else you could ensure the kind of transparency nor portability that would make it work."

He added that the most important aspect would be to come up with a definition of pension everyone could agree with, in his view a long-term savings vehicle for generating retirement income, separate from the different views on governance.

Lipkin said that, by necessity, many regulatory powers controlling pensions still remained on a national level, but that Europe had enjoyed successes in other areas.

"If you look at where European Union has been most successful, it has been in the single market," he said.

"The asset management industry, specifically the fund management industry, has been a beneficiary of that, but then so has the consumer.

He cited the development of UCITS as a functional cross-border model, adding that a pan-European pension should be a legitimate aspiration for the EC.

"If you look at those freedoms that are at the heart of the single market," he said, citing the free movement of services, labour and capital, "you can see how they might apply to pension provision, because consumers would be beneficiaries of portability."

He argued that the resulting scale of any such new scheme would be advantageous for savers, as it would reduce costs.

"There seems to be a clear alignment with the longer term interests of the consumer and the longer term interests of the industry," he said.

Lipkin questioned the application of Solvency II on pension funds, but added that the IMA did not dispute the idea that schemes should be solvent.

Instead, it questioned the wisdom of applying regulations developed for the insurance industry on a UK defined benefit fund, which operated on a "wholly different basis, historically, given the nature of the employer covenant".

His comments come after Joanne Segars, chief executive of the UK's National Association of Pension Funds, cautioned against the use of Solvency II, citing the safety provided by the employer covenant, as well as the existence of the Pension Protection Fund.

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