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UK rejects European Solvency II Pensions rules

The Pensions Minister plans to fight European plans to impose burdens on British businesses, which have the potential to damage pensions and the economy.

The European Commission is currently looking to implement Solvency II funding rules to pensions, which they believe will improve efficiency and occupational retirement provision across the continent. It is believed that it will also ensure a level playing field between insurance firms and better pension protection.

However, the UK Government believes that there are fundamental differences between insurance products and pensions, and Britain already has comprehensive protection in place.

The Pensions Minister Steve Webb has now raised concerns that the proposals could cost UK employers with final salary schemes hundreds of billions of pounds and lead to the closure of some schemes.

He said: “We will not let up until we make the Commission see sense. We expect them to publish a comprehensive impact assessment to clearly expose the catastrophic effect these rules would have on British pension schemes.

“It is horrifying these plans have got so far without this. I would encourage employers and representative groups to take part in the consultation on technical specifications by the end of July.”

If Solvency II rules were imposed they would affect all private sector companies offering defined benefit (DB) schemes in Britain, which represent around half the private pension assets in this country, with liabilities of about £1,200 billion.

The Commission says changes are needed to remove barriers to workers mobility and portability of pensions. But European studies show only 1.5 per cent of workers live in different a member state from their country of origin. And only 4 per cent of Europeans ever moved to another Member State and only 18 per cent moved outside their region.

He continued: “While Brussels is fiddling, Britain is putting reforms in place to keep our pension system sustainable in the future.

“ We need to work together across Europe to tackle the real pension challenges we all face. And we need to think about how the risks of pension provision are more evenly shared between employer and employee so we can give people more certainty about what pension they will get.“

The Pensions Regulator is encouraging the UK pension sector to play a full role in responding to the European Insurance and Occupational Pensions Authority’s consultation document on technical specifications which will inform EIOPA’s quantitative impact study.

This was posted in Bdaily's Members' News section by Ruth Mitchell .