EU rules would close many British pensions
The EU are being blamed this morning for new rules which could cause company pensions to close at a faster rate. The laws are, however I believe just making companies face up to the impossible task of funding company schemes.
The EU body that regulates occupational pensions estimated that the deficit in the UK’s defined benefit pension schemes would £450bn if the new rules, called “Solvency II”, were introduced. The deficit currently stands at £237bn, according to figures released on Tuesday by Britain’s Pension Protection Fund.
Steve Webb, the minister for pensions, said: “The EU’s latest figures show the extremely high cost its plans would place on UK defined benefit pension schemes.
“This confirms that any such new rules would harm businesses’ ability to invest, grow and create jobs, and many more schemes could be forced to close. I continue to urge the Commission to abandon these reckless plans.”
He said the EU’s estimate of a £450bn cost was “in line with the worst case scenario” envisaged by the Pensions Regulator produced for the Government last year.
The National Association of Pension Funds (NAPF) warned that moving to the new rules for pensions would put a “huge burden” on Britain’s remaining final salary pension schemes and the businesses that run them.
Joanne Segars, the NAPF’s chief executive, said: “The EU plans for UK pensions come with a clear and unpalatable price tag. Businesses trying to run final salary pensions could be faced with bigger pensions bills to plug an astonishing £450bn funding gap. This would have a highly damaging effect for the retirement prospects of millions of workers.
“This project has been conducted at breakneck speed due to the Commission’s ludicrously tight timetable. This cannot be the basis for formulating a policy that could undermine the retirement plans of millions of people both in the UK and across Europe.
“The European Commission needs to rethink its proposals, instead of trying to hurry them through. It would be better to focus on the 60m EU citizens who have no workplace pension, instead of eroding the good pensions already in place.”
I disagree, for once I agree with the EU and think they are right to make companies pay their defecits. However, I think the UK and the EU are missing the bigger issue which is how do you encourage individuals to save for their own pensions.
For more info Reuters
Nigel Green deVere Group
Blog written 10 th April