Three of the UK’s most influential trade bodies have warned the EU Commission’s plans to impose Solvency II requirements on pension schemes will have a “disastrous impact” on economic growth and employment.
In a joint letter to European Commission president José Manuel Barroso, the National Association of Pension Funds, the Trades Union Congress and the Confederation of British Industry say proposals to ramp-up funding requirements will force all remaining defined-benefit schemes to close.
The organisations also claim the plans will hit economic growth by diverting money away from investment in growth, job creation and research and development, and by driving pension scheme investments away from equities.
The letter says: “We strongly support the Commission’s objective of ensuring pension scheme members benefit from risk-related regulation.
“But the measures currently envisaged by the Commission fail to achieve this. By demanding dramatic increases in funding from employers, the Commissions plans would – at best – force all remaining defined-benefit schemes to close and – at worst – push many businesses into insolvency, leading to significant job losses.
“Far from benefiting employees and protecting scheme members, this would create a system in which job creation would be seriously hurt and pension provision inevitably damaged.”
Speaking to Money Marketing, The Pensions Regulator chief executive Bill Galvin says the proposals could be “destructive” for the UK.
He says: “My personal view is that a transcription of Solvency II rules onto pension schemes is absolutely the wrong way to go.
“At the moment there are still a range of possible outcomes, some of which could have a minimal impact on the UK and some of which could be very destructive.”
Industry experts claim the reforms, if implemented, could cost the UK economy up to £1trn. Full analysis of the impact Solvency II for pensions could have on the UK is available here.