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Pain warns Solvency II poses threat

FSA managing director of retail markets Jon Pain says Solvency II is “a potential timebomb” for the pension market.

At the Gleneagles Savings and Pensions Industry Leaders’ Summit on Saturday, Pain called on the pension industry to do more to convince Europe that a liquidity premium should be allowed under the new rules.

He said: “The directive poses a significant risk for the pension market. The nub of the issue arises from the question of whether the legislation will allow firms to continue to take into account a liquidity premium in capital provisions for annuity business.

“If the implementing legislation does not allow for it, annuity providers are likely to have to significantly increase the capital they hold and, as a result, increase the cost to consumers.”

The Association of British Insurers recently warned that the amount of capital annuity providers would have to hold if the proposals were passed could be equivalent to the current market capital of the whole industry.

Pain said that this was “probably an overestimation” but the concerns highlighted the “potential bombshell” for the pension market.



Lead firm fails on cash pledge

Lead generation company SMS Signals has yet to honour a money-back guarantee given to 10 advisers after failing to provide them with leads.

Engine room

Readers of my column will know how keen I have been on corporate bonds over the last year or more. I admit I was little bit too early with some of my recommendations, but the rally we have seen since March in corporate bonds should mean that most people are now in profit. The question I am constantly being asked at the moment is whether the rally is over or if corporate bonds is still a buy.


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