Pension watchdogs should ease funding demands - EU

National pension regulators should allow schemes longer to build up assets which meet future benefit commitments in the wake of the global financial crisis, said the chairman of the EU committee of insurance and pensions watchdogs.

Thomas Steffen, the head of The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS), said regulators should be flexible on the extension of recovery periods, the grace granted to schemes to bring their assets on a par with their liabilities.

"We have already seen some countries relaxing some rules to prevent forced selling of assets to meet national solvency requirements," he told delegates at the European Pension Funds Congress on Tuesday.

"We should encourage pension managers and trustees to talk to their supervisors on a case by case basis to find mutually satisfactory solutions," he said.

National regulators across the EU set the grace periods allowed to individual defined benefit (DB) pension schemes as they seek to plug funding deficits. The wholesale sell-off in assets caused by the fallout from the credit crunch has left pension funds nursing huge shortfalls.

Britain's pension safety net the Pension Protection Fund estimates the aggregate deficit of UK DB schemes was 97.3 billion pounds at the end of October against a surplus of 84.1 billion a year earlier.

CEIOPS advises the European Commission on regulation of insurance and workplace pensions and sets guidelines to encourage cooperation between national supervisors.

But Steffen stressed that pension schemes must turn to national supervisors, not the European Union, for guidance in the current market turmoil.

"There is recognition within CEIOPS that immediate responses to issues faced by occupational pension funds as a consequence of the financial crisis are most appropriately handled by national supervisory authority, within the national legal frameworks and I would not see an enhanced role for CEIOPS under the current circumstances," he said.

Steffen, who is also the chief executive of the German financial regulator BaFin told Reuters: "We have a limited coordination role when it comes to crisis responses between pension fund supervisors."

"(Pension) schemes are very national and we do not have the comparable internal market for pension funds like we have for banking and insurance," he said.