The European Commission is rushing through harmful plans that could saddle UK pension funds with at least an extra £300bn in costs, and its impact assessment for these “Solvency II-type rules” proposals is flawed, the NAPF warned today.
The NAPF said the UK was not being given enough time to consider the EC’s proposed approach to estimating the impact of a Solvency II-type regime for final salary pensions. It also criticised the omission of key questions from the study, and the unexpected introduction of complicated new issues.
The NAPF made these points in its response to the Quantitative Impact Study (QIS) consultation from the European Insurance and Occupational Pensions Authority (EIOPA). The consultation sought views on how EIOPA should measure the impact of Solvency II-type rules on pension funds.
Darren Philp, NAPF Policy Director, said:
“It is astonishing that the industry has been given only six weeks to assess very complex and technical issues, which will help determine the future of pension provision in the UK.
“Solvency II-type proposals could have extremely damaging consequences for our pensions and the wider economy. They would hit businesses running final salary pensions, and would also take jobs and investment out of the UK’s faltering economy.
“We are concerned that the quality of policy-making is being driven by the political timetable, rather than by a commitment to getting it right. These are long-term issues and the EC should take the time to address them properly, rather than rushing them through.
“Crucially, the consultation does not answer the key question of how the Holistic Balance Sheet will be used in practice. Will it form a new funding regime, or will it simply be a disclosure item for trustees?
“The consultation also throws up completely new concepts, such as the question of how to value pension protection schemes and employer support for a pension scheme. These issues deserve their own round of QIS.”
The NAPF calculated that Solvency II-type rules could cost UK pension funds at least an extra £300bn as they would be forced to dramatically increase the capital in the fund. Faced with extra funding demands, many companies would have no choice other than to close their final salary pension schemes.