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22 Apr 2013

Solvency II To Cost UK Businesses £450bn, EU Commissioned Report Finds

The European Commission should drop its plans to implement the proposed Solvency II regime for defined benefit pension schemes, as it would put additional financial burden on UK businesses, the British government has claimed.

UK businesses and pensions funds have also opposed the reforms, which aim to force pension funds to protect themselves from risk with extra capital. According to a new report from the EU regulator, the European Insurance and Occupational Pension Authority (EIOPA), the Solvency II regime would cost UK businesses £450 billion.

The proposals are designed to ensure that pensions savers are better protected, but companies fear that being forced to take on such a burden would affect their ability to invest and to create jobs, even leading to pension schemes closures.

Britain´s pensions minister Steve Webb commented that the data from the report proves that the cost for UK defined benefit schemes would be extremely high. In fact, the estimated £450 billion of extra costs was in line with the worst-case scenario that The Pensions Regulator predicted last year, he stated. Webb urged the European Commission to call off these ‘reckless plans´, Money Marketing reported.

Similar concerned have been raised by the Confederation of British Industry (CBI), whose director of employment and skills, Neil Carberry, said that the preliminary estimates featured in the EIOPA report are worse than previously predicted and the European Commission should not ignore that warning. He warned that among the other adverse effects of the potential implementation of the reforms, the new capital requirements might destabilise markets.

Copyright © M2 Bespoke 2013

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