A European Commission (EC) Green Paper focusing on pension systems is causing concern in the UK because of its proposals for a Solvency II-style structure for pension schemes.

Critics of the paper have labelled it ‘inappropriate’ for the UK and an attempt to add a further layer of regulation to an already over-regulated environment.

“The Commission sees Solvency II as potentially a ‘good starting point’ for developing a pensions solvency regime,” said Jane Beverley, principal and head of research at Punter Southall. “The paper asks simply what an equivalent solvency regime for pension funds would look like, and does not ask the question which surely should come first – whether a solvency regime is required at all for pensions.”

Beverley said Punter Southall has previously expressed concerns about the adoption of a Solvency II style regime for pensions in the EU, since pensions and insurance are “fundamentally different”.

The National Association of Pension Funds (NAPF) added that unnecessary rules could damage UK pensions.

“Europe is getting older and retirement ages will have to migrate upwards,” explained Joanne Segars, chief executive of the NAPF. “The recession as put even more pressure on pensions, so a high-level EU debate about retirement is useful and welcome.

“But Europe has a patchwork of very different pension arrangements and a one-size-fits-all approach will not work. The UK already has a sound regulatory regime, support by The Pensions Regulator, so the EU should think carefully before proposing new regulations.”

Segars said the suggestion of applying the insurance industry’s funding model would be “inappropriate and could cause serious problems. And unlike insurance companies, UK pension schemes have access to the ongoing support of the employer and, if that fails, the Pension Protection Fund.”

However, Towers Watson said the Paper holds significant promise of furthering the development of cross-border pension schemes, and has also been given the thumbs up by the Investment Management Association (IMA) for its timely work.

If the Pensions Directive is amended as implied by the EC Green Paper, Towers Watson said cross-border plans could develop further and become a mainstream feature of the European pension landscape.

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