The European Commission has decided to postpone the implementation of stringent new solvency requirements on corporate pension funds, under a revised pension directive to be presented this fall.

The solvency rules would have required companies to put more cash into their pension funds to make them more financially secure, potentially costing European companies hundreds of billions of dollars. That plan has now been put on hold, at least for now.

In a speech, European Union internal market and services commissioner Michael Barnier said further technical information is necessary before making any decisions on the solvency rules, which will remain an open issue for the time being.

“In my view, the situation should be re-examined once we have more complete data,” said Barnier. “I emphasize that with regard to solvency rules, we must not lose sight of the need to guarantee in the longer term a level playing field between different providers of occupational pensions.”

The revised Directive on Institutions for Occupational Retirement Provision will now focus solely on governance, transparency and reporting requirements for corporate pension funds. “On those aspects there is broad consensus, at least on the principles,” said Barnier.

He further stressed that “urgent” action was needed to improve governance and transparency. “The diversity of national practices and the gaps in certain Member States hinder the development of a genuine internal market for occupational pensions, and harm the protection of future pensioners,” Barnier added.

Industry Reaction

Industry representatives welcomed the decision not to introduce the new solvency rules. “Commissioner Barnier has made the right decision as it is vital to take more time for a thorough analysis of the effects of possible changes in solvency rules, which differ greatly between member states," said Matti Leppälä, secretary general and CEO for PensionsEurope, a trade group that covers the workplace pensions of roughly 80 million European citizens.

Solvency requirements imposed on pension funds “would have considerably increased the costs of occupational pension provision schemes and, in the worst case, closed them down,” said Uwe Combüchen, director general for the Council of European Employers of Metal, Engineering and Technology-based Industries. “Weakening of companies' capacity to invest and innovate is, hence, avoided.”

The National Association of Pension funds also lauded the decision. “The great diversity of pension systems across the EU makes it very difficult to devise a ‘one size fits all' system,” said James Walsh, EU and international policy lead for the NAPF. “The proposals could have increased U.K. defined benefit pension deficits by 50 percent, causing great damage to pension schemes and their sponsoring employers.”

The solvency requirements have been postponed indefinitely and will not be considered again until the next commissioner takes office in November 2014.