Pensions deficits set to soar on Solvency II-style EU regulations

BRITAIN’S largest companies face paying billions more into pension schemes to cover the costs imposed by planned new EU regulations, a study revealed today.

The average FTSE100 firm could see its pension liabilities rise by up to £2.5bn, Deloitte said, as three-quarters of those surveyed said gross liabilities will rise by between 20 per cent and 50 per cent under new capital rules.

The EU’s pensions regulator is consulting on plans to impose Solvency II-style capital requirements on pension schemes, forcing the funds to build up a capital buffer to protect against shocks.

However, the UK pensions industry has argued the nature of the pension funds, with very long-term investors and liabilities, means they are not vulnerable to short-term shocks in the way the insurance industry is, and so do not need the same kind of buffer.

Furthermore, the study of schemes and their sponsors with liabilities of over £100bn found a rise in costs is happening at a particularly bad time.

“Almost without exception, respondents are critical of the proposals,” said Deloitte’s Feargus Mitchell.

“The proposal will be one more factor accelerating the decline of defined benefit pensions in the UK.”