24 April 2012 - Post by:Helen Powell
Today’s Daily Express headline was alarmingly topical for delegates passing the news stands on the way to the NAPF Europe conference this morning. It gave the speakers pause for thought – and scope for humour, with Fritz von Nordheim of the European Commission commenting that tomorrow’s headline could well be ‘Europe will steal your lunch money’.We’ve spent the morning navigating a forest of acronyms: EMIR, MiFID, CRD IV, FTT, AIFM, FATCA and IORP to name a few. Some of those will already be familiar to you – others less so, but each represents a legislative stream which, even if it doesn’t start from a pensions source, could well affect your scheme before too long.
The sense of the meeting is that timing on the review of the IORP Directive (with its potential to increase funding requirements) is slipping back, perhaps to 2014 rather than 2012. We’ll hear more on that this afternoon, including from pensions Minister Steve Webb.
For now, the more clear and present danger for both DB and DC schemes looks like coming from the non-pensions drivers which could combine to fuel a move out of equities and into bonds. EMIR and its worldwide equivalents are likely to impose collateral requirements on transactions which could have the effect of driving bond prices up, with a domino effect of bringing yields down, increasing liabilities, reducing returns, raising employer DB costs and lowering member DC incomes. Add to that scenario the concept of increased funding requirements under a holistic balance sheet, and it seems that even if your lunch money is safe, your pension scheme may not be.
The key thing employers and schemes can do over the next few months is to make your voice heard. The NAPF and its European counterparts are fighting fires on many fronts, and they need back-up. We’ll brief Allen & Overy’s clients as and when consultations take place: let’s do what we can to prove the Daily Express wrong!
Helen Powell is a senior professional support lawyer at Allen & Overy LLP.