UK WORKERS could see their pensions cut by 20 per cent under new European Union (EU) plans to tighten pension and investment rules, the Association of British Insurers (ABI) warned yesterday.
Peter Vipond, director of financial regulation at the Association of British Insurers (ABI), said he has been in talks with EU regulators over the Solvency II legislation and has made the industry’s position clear over the plans.
The proposals are currently in draft form but could come into force as early as 2012.
Solvency II was originally proposed in 2005 and included plans to force some pension funds and insurers to use a form of accounting that would mean they have to take current market liabilities on investments into account when making solvency calculations
In 2005, corporate bonds, in which pension funds tend to be heavily invested, were stable but they have since become extremely volatile due to the downturn.
These problems would have to be taken into account by the funds, forcing them to then take drastic and costly action to boost their solvency levels.
Lord Turner, head of UK financial regulator the Financial Services Authority, earlier this month told an ABI conference that the insurance industry should mount an organised campaign to fight the European rules.