Firms may have to push at least £600bn into their schemes under new proposals that aim to make pension schemes hold solvency capital against risky assets, in line with rules affecting insurance groups and banks.
“Widely quoted estimates of a £600bn bill on UK companies could in fact be as much as £1,000bn depending on how the rules are introduced,” said Charles Cowling, managing director of JLT Pension Capital Strategies, part of insurance broking group JLT.
Cowling said such contributions “would clearly be disastrous for our economy”, and would accelerate the fall of the UK’s few remaining defined benefit schemes.
“It is probably too late for this Pandora’s box to be closed,” he added. “The onus is now on companies with large pension obligations to accelerate plans for managing their way out of these very expensive liabilities.”
In a separate statement, the Brussels-based European Private Equity & Venture Capital Association (EVCA) added its opposition to the plans, which it says will affect 25 per cent of all EU workers.
In its response to insurance regulator EIOPA, EVCA chairman Karsten Langer said the plans would stop schemes from both funding their liabilities and investing in vital capital projects via private equity funds.
“In their efforts to minimise systemic risk, regulators are in danger of negating the stabilising effect of long-term investors in global financial markets and reducing the ability of institutions to invest in the real economy,” he said.