Pension body decries potential new EU regulations

Employment Law & HR update 05/01/2012

British employers have been warned that they could have to inject more than £300 billion in to their final salary pension schemes if new EU legislation is passed.

The National Association of Pension Funds (NAPF) has said that the Institutions for Occupational Retirement Provision (IORP) Directive would damage the UK economy and jobs market and would lead to fewer and fewer private companies offering final salary pensions.

The NAPF spoke out in its response on the matter to the European Insurance and Occupational Pensions Authority (EIOPA). The NAPF's chief executive, Joanne Segars, said that the introduction of a 'Solvency II type capital regime' to determine the solvency of pension funds would be a burden to private companies and make pension provisions far too expensive.

"The overall objective to make European pensions more secure is one which we support. But the introduction of Solvency II type rules will have the opposite effect," she said. "Faced with extra funding demands, many employers will revisit their pension arrangements. And what we are likely to see is the closure of more final salary pensions."

Segars explained that the UK pension system already contains a strong member protection system through a number of layers of scrutiny, including the employer covenant, the work of the Pensions Regulator, and the safety net provided by the Pension Protection Fund.

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