Solvency II Reforms. Don’t gamble on the outcome

Time Out for Buy Ins and Outs?

Chancellor of the Exchequer Rishi Sunak met the UK leading life insurers on 27th June.  He discussed the Government’s objectives for Solvency II reform and its current consultation.  That closes on 21st July.  Reform is a key part of “unlocking tens of billions of pounds of investment into the economy”.  

How the objectives are to be achieved is the subject of fierce debate with insurers.  Solvency II reform has become a major theme in the FT.

For DB pension schemes the long term impact of Solvency II reform should be positive.  But right now why not just wait and see.  Action looks like a gamble with members’ and sponsors’ money.  Yet Solvency II is a mysteriously under addressed subject by actuarial consultants.  Pricing and what enhanced security protection is offered will be affected.

Some suggest Solvency II is already priced in or that it will have little effect.  That is speculation.  Don’t forget major new entrants are expected in a market which currently has a only short list of sizeable players.

Buyins and buyouts may be affordable.  But right now are they desirable?  With inflation around 10% perhaps it is time to give attention to (one off) discretionary benefit improvements as a priority.
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And there is another major reason to wait for updates.  It will only be in mid-2023 that longevity tables will have the 2021 Census and Covid factored in.  Why not prepare, but do nothing?  Time for some masterly inactivity from trustees whatever the industry pressures.

And meanwhile, why not complete our survey and look at our animated take on pension derisking.

5 reasons buyouts may go on hold in 2022. Will pension scheme renewal take over?

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