EU plan set to end final salary pensions and cost hundreds of billions of pounds
THE EUROPEAN COMMISSION (EC) came under fire from British pension funds, employers and investors after it appeared to ignore concerns that proposed pension rules will cost hundreds of billions of pounds, force the closure of all final salary schemes and even bankrupt some businesses.
It wants to impose rules on pension funds similar to the Solvency II regulations being worked out for the insurance industry.
That would mean holding more liquid assets to protect against a short-term shock – something insurers might face, but not pension funds, which have very long-term liabilities.
In a white paper published yesterday, the EC noted that market participants think “the EU should avoid binding regulation”, and that they want “to focus on the nature and duration of pension liabilities”.
However, it also highlighted the European Parliament’s view that “elements of Solvency II for a valuable starting point” for the new rules.
Opponents of the rules believe the EC has not fully thought through their consequences.
“We have called for a full impact assessment,” said Jim Bligh from the Confederation of British Industry.
“Draft legislation is expected to be published by the end of this year, and it would be very difficult to do a proper assessment across the whole EU and all the different pension schemes by then.”