EIOPA published 2017 IORP Stress Test Report

On 13 December EIOPA published 2017 IORP Stress Test Report.

The main findings of the report are the following:

The European DB and hybrid occupational pension sector has, on average, insufficient assets to meet pension liabilities on the national balance sheet, both in the baseline and adverse market scenario. These vulnerabilities are even more pronounced on the common, market-consistent balance sheet.
The DC occupational pension sector would experience a drop of 15 % in the market value of investment assets in the adverse scenario, reducing the individual accounts of DC pension scheme members and, in case the scenario persists, leading to lower pension income when the members enter retirement.
More than a quarter of IORPs providing DB and hybrid schemes are covered by a sponsor that may not be able to (fully) support the pension promise following the adverse scenario. In addition, the stress test results show that pension obligations may exert substantial pressure on the solvency and future profitability of companies with a potential spill-over to the real economy.
Recovery mechanisms mitigate the short-term effects on financial stability, but in the longer-term put the burden of restoring the sustainability of pension promises disproportionately on younger generations.