Pensions minister Steve Webb has lashed out at the “devastating” impact of Solvency II proposals, arguing it could add up to £400bn to UK pension liabilities.
Speaking to the European Retirement Federation in Frankfurt today, Webb warned the “dangerous, reckless” and “wrongheaded” proposals would have a “devastating” impact.
The European Commission plans to impose Solvency II capital requirements on pension providers. The Department for Work and Pensions says new rules are likely to increase shortfalls on final salary schemes by £150bn but could end up costing as much as £400bn.
Webb said: “This would harm businesses’ ability to invest, grow and create jobs, and many more schemes could be forced to close.
“We are urging Brussels not to pursue these dangerous, reckless plans. In Britain, we are making reforms to ensure our pension system is sustainable. In Europe, we should be working together to tackle real pension challenges, and find ways of better sharing the risk of providing pensions between the employer and employee.”
DWP data shows that over the next 20 years the percentage of defined benefit schemes open to new members would collapse from 16 per cent to 5 per cent, and those open to existing members from 58 per cent to under 25 per cent.
Labour business secretary Chuka Umunna has previously hit out at Solvency II for the potential damage to economic growth and called for cross-party consensus.
Eiopa, an advisroy body to the EU, has said it will not “copy and paste” Solvency II proposals for pensions and any claims that it will increase pension deficits are “crazy”.
National Association of Pension Funds chief executive Joanne Segars threw its support behind Webb’s attack.
She says: “The UK has one of the strongest pension protection systems in Europe already and does not need this regulation. Instead the Commission should focus its activities on other aspects, like pensions governance and communications.”