All DB schemes in U.K. could close
LONDON (Reuters) — Many United Kingdom businesses could be pushed into insolvency by European pension proposals, risking significant job losses, industry bodies warned on Monday.
In a letter to José Manuel Barroso, president of the European Commission ahead of EU directives due this week, the National Association of Pension Funds (NAPF), the Confederation of British Industry (CBI) and the TUC labour union group warned the new rules would have a disastrous impact.
"By demanding dramatic increases in funding from employers, the commission's 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," they wrote.
On Wednesday, the European Insurance and Occupational Pensions Authority (EIOPA), a pan-European watchdog, is due to send final recommendations on its EU pensions directive to the EU Commission, aimed at addressing shortfalls in pensions schemes and improving risk management.
EIOPA is proposing to adapt Solvency II capital rules, originally aimed at the insurance industry, which could force pensions funds to hold large cash buffers in proportion to their liabilities, to guard against future risks.
Solvency II has been more than 10 years in the making, and its original 2012 introduction date has already been postponed once, drawing criticism from the insurance industry.
The NAPF, which represents 1,200 pension schemes in the U.K., with 15 million members and assets of around 800 billion pounds (C$1,200 billion) has already warned that the new rules could cost the industry 300 billion pounds (C$473 billion).
