The European Union is considering whether stronger capital-reserves regulations should apply to corporate pension plans—an idea that could force companies to put more cash into their plans.
The proposal is to apply provisions from the EU’s Solvency II directive to pensions, possibly sooner than later. That directive, itself unlikely to appear in national legislations before 2012, covers capital adequacy for the insurance industry. The crucial wording would result in extra margin (also known as “buffer assets”) that pension plans would need, to assure that the plans can meet their expenses. That would force a significant shift toward cash or fixed-income securities in pension plans, rather than equities.
