Pensions Minister Steve Webb said the Government remains resolute it will fight EU plans to apply Solvency II funding rules to pensions on his return from the Continent, where he met leading politicians and pensions experts in the Netherlands and Denmark.
Brussels has set out plans to impose massive burdens on British business that would damage our pensions and economic growth for no good reason.
The Government is adamant there is no “one size fits all” model for pensions across EU member states and had made this clear in Parliament and to the European Commission.
The European Commission has said it is listening and has just announced an extension to its timetable. However this prolonged uncertainty still means that schemes are increasingly unsure about their long term investment strategies.
If Solvency II rules were imposed they would affect all private sector companies offering defined benefit (DB) schemes in Britain, which represent around half the private pension assets in this country, with liabilities of about £1,200 billion.
Steve Webb said:
There will be no compromise on Solvency II. It is unbelievable the Commission is pressing ahead with these pointless proposals which would cost UK employers with final salary schemes hundreds of billions of pounds and lead to DB scheme closures.
We will not let up until we make the Commission see sense. We expect them to publish a comprehensive impact assessment to clearly expose the catastrophic effect these rules would have on British pension schemes. It is horrifying these plans have got so far without this. I would encourage employers and representative groups to take part in the consultation on technical specifications by the end of July.
While Brussels is fiddling, Britain is putting reforms in place to keep our pension system sustainable in the future. We need to work together across Europe to tackle the real pension challenges we all face. And we need to think about how the risks of pension provision are more evenly shared between employer and employee so we can give people more certainty about what pension they will get.
The Commission says its aim is to improve the efficiency and occupational retirement provision across the EU ensuring a level playing field between insurance firms and better pension protection. But the Government argues that there are fundamental differences between insurance products and pensions and Britain already has comprehensive protection in place.
The Commission says changes are needed to remove barriers to workers mobility and portability of pensions. But European studies show only 1.5 per cent of workers live in different a member state from their country of origin. And only 4 per cent of Europeans ever moved to another Member State and only 18 per cent moved outside their region.
The Pensions Regulator is encouraging the UK pension sector to play a full role in responding to the European Insurance and Occupational Pensions Authority’s consultation document on technical specifications which will inform EIOPA’s quantitative impact study.
Notes to Editors:
- The European Commission is reviewing the IORP (Insurance and Occupational Pensions) Directive which provides the EU framework within which funded occupational pension schemes are regulated. The Commission has said it wants to harmonise the rules governing pensions with Solvency II capital rules for insurance.
- In April 2011 the European Commission asked EIOPA (The European Insurance and Occupational Pensions Authority) to provide advice on how this might be accomplished and what modifications may be needed.
- On 1 June the European Commission announced an extension to its timetable to allow more time for impact assessments. EIOPA has published a draft consultation on technical specification on 15 June. The consultation ends on 31 July 2012. EIOPA will send a revised version to the European Commission in the autumn.
- 1.5% of workers from the Member States of the EU live in a different Member State from their country of origin - European Commission study, Geographic mobility in the European Union: optimising its social and economic benefits (April 2008). Long distance mobility is not common: only 18% of Europeans have moved outside their region, while only 4% have ever moved to another Member State and only 3% outside the European Union - study published by Eurofound website, (European Foundation for the Improvement of Living and Working Conditions (2007) - Mobility in Europe
- Britain is reforming pensions to provide sustainable and adequate provision for the future by raising the state pension age, introducing workplace pension reforms and a single tier state pension.