A government minister has promised to fight EU plans to impose funding rules on British occupational pensions which could cost businesses £500bn.
Steve Webb, the pensions minister, has said there will be “no compromise” on the potentially “catastrophic” proposals, which could kill off many pension schemes if they are put in place.
Providers say their costs would be dramatically increased and more funding would need to be injected if the European Insurance and Occupational Pensions Authority (EIOPA) revises the rules assessing the solvency of pension funds.
The changes could cost British businesses up to £500bn, according to previous PricewaterhouseCoopers (PwC) estimates. The additional costs would be laid at the door of individual savers, who would receive less generous pensions.
Private sector firms offering defined benefit (DB) scheme would be affected if the Solvency II rules to “harmonise” schemes come into force. This would affect about half of all the private pension assets in Britain, taking in liabilities of approximately £1,200bn, the government said.
Webb has been locked in talks with pension experts from Denmark and the Netherlands. But he said the ongoing uncertainty means some schemes are becoming unsure about how they should be investing, as the European Commission extends its timetable on the issue.
“There will be no compromise on Solvency II. It is unbelievable the Commission is pressing ahead with these pointless proposals which would cost UK employers with final salary schemes hundreds of billions of pounds and lead to DB scheme closures,” said Webb.
“We will not let up until we make the Commission see sense.
“We expect them to publish a comprehensive impact assessment to clearly expose the catastrophic effect these rules would have on British pension schemes. It is horrifying these plans have got so far without this.”
As many as 10 million people will automatically be placed into pension schemes from this autumn as part of a landmark overhaul of workplace pensions, with larger companies getting the ball rolling.
The change is part of a plan to tackle the pension savings crisis as concerns grow that the nation is getting older yet failing to save enough money for the future.
“While Brussels is fiddling, Britain is putting reforms in place to keep our pension system sustainable in the future,” said Webb.
“We need to work together across Europe to tackle the real pension challenges we all face.”
You mght also like…
Our free newsletter