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European Commission backs down over £450bn Solvency II-style plans

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The European Commission has delayed introducing Solvency II-style capital requirements for defined benefit pension schemes which were estimated to cost £450bn.

Proposals from the commission requiring DB scheme sponsors to hold extra capital in order to better protect occupational pension savers sparked an industry fightback last month, with pensions minister Steve Webb, the Confederation of British Industry and the National Association of Pension Funds all uniting against the plans.

The plans were set to be introduced through changes to the Institutions for Occupational Retirement Provision directive.

European Commissioner for Internal Market and Services Michel Barnier said last week more research is needed before introducing the new capital requirements. He will set out legislative proposals in the autumn that will instead concentrate on occupational pension funds’ governance, transparency and reporting requirements.

Barnier said: “This proposal will not cover the issue of solvency rules for pension funds, which will for the time being remain an open issue. In my view, the situation should be re-examined once we have more complete data.

“As I have often said, my priority is to protect future pensioners. We must face up to the weaknesses in some occupational pension funds. However, I have no desire to penalise national systems which work well. And I especially do not want, in the current fragile economic situation, to harm the ability of pension funds to play their role as long-term investors.”

Page Russell director Tim Page says: “Had this proposal gone through, it would have killed off what was left of the DB sector in the UK. It would seem the commission has seen sense and backtracked with good grace. Let us hope this gets lost in the long grass never to return.”

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