In a speech to the financial services industry this morning, Myners acknowledged that European regulators were aware of the UK’s concerns with certain proposals, particularly the exclusion of an illiquidity premium but said there was a long way to go before the legislation was fit for purpose.
He said: “We need to make sure that we do not overvalue the risks associated with annuity liabilities, thus requiring overly prudent levels of capital.
“Setting capital at an excessively conservative level will have very real consequences in terms of disincentivising retirement provision and adversely impacting pensioner income. For all the talk of discount rates and technical provisions we must be crystal clear that the risk here is increased costs for pension businesses, and ultimately pensioners.
“We absolutely cannot allow this to happen. Government is committed to ensuring that these regulatory reforms do not unintentionally impact the lives and well being of pensioners in the UK and elsewhere in Europe.”
Myners applauded the Government’s efforts to date which he said have resulted in the liquidity premium being explicitly discussed in a European Commission working group. He also highlighted Tuesday’s final advice from Ceiops which recognised more work was needed around the liquidity premium.
He added: “In this instance technical arguments are required to achieve social aims. Government has a social duty to the pensioners and future pensioners of the UK, and the industry has a robust technical basis for its concerns.
“I am committed to furthering the technical argument here and in Europe, building on the Ceiops advice, to ensure that our social obligations are met.”