Webb vows ‘no compromise’ on Solvency II for pensions
Pensions minister Steve Webb announced today (21 June) that it will fight European Commission plans to apply Solvency II funding rules to pensions, a move which many industry commentators have said could cost the industry billions.
Steve Webb, pensions minister, has returned from a series of meetings in Europe, where he met leading politicians and pensions experts in the Netherlands and Denmark.
In particular he discussed plans in Brussels to extend Solvency II rules, which will impose strict guidelines on capital adequacy for financial institutions, to pensions, which he said would “impose massive burdens on British business that would damage our pensions and economic growth for no good reason”.
In a statement Mr Webb said the government is adamant there is no “one size fits all” model for pensions across EU member states and it had made this clear in parliament and to the European Commission.
The EC 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.
The government argues that there are fundamental differences between insurance products and pensions and Britain already has comprehensive protection in place.
The 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, the government said.
If Solvency II rules were imposed they would affect all private sector companies offering defined benefit schemes in Britain, which represent around half the private pension assets in this country.
Insurers have previously told FTAdviser that the cost of implementing EU proposals to adapt capital rules for insurers vary from £100m to £1,000bn. However, Mr Webb anticipates it to be in the region of £1,200bn.
Mr 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.”
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.