The EU wants pension schemes to hold enough funds to pay out in the event of a once-in-200-year catastrophe, to make sure savers are very thoroughly protected.
But critics argue that the plan is based on similar rules for insurers, who have to pay out rapidly when disaster strikes, which is inappropriate for pension funds as they are long term investors who pay out over long time frames.
Analysis by Oxford Economics for the CBI estimates the plans would cost UK firms £350bn, with the loss of 180,000 jobs and a permanent hit to GDP of 2.5 per cent.
After all that, it would also hit the value of pensions by stopping them from putting money into the longest-term investments, like infrastructure projects.
And by forcing the funds into low risk investments like government bonds, returns would fall, forcing up costs for employers and discouraging saving.
“We have a tough regulatory system in this country, so these changes are completely unnecessary. It is alarming the European Commission (EC) is still turning a deaf ear to calls from businesses, trade unions and pension funds to bin these proposals,” said the CBI’s Katja Hall. “The EC must leave individual EU members to deal with their own retirement saving systems, as they do now – rather than imposing a new system from the centre.” And the pensions industry agreed.
“Europe is pushing for a dangerous solution when there is no problem in the first place,” said Joanne Segars from the national Association of Pension Funds (NAPF).
“These plans would kick our economy when it is down, and the damage to jobs, growth and living standards would be felt for decades.”