New Brussels rules will burden struggling final salary pensions with 100billion bill says minister
Pensions Minister Steve Webb said new rules will burden final salary pensions with a 100bn bill which would trigger huge numbers of closures of schemes
The last of Britain”s top private pension schemes could be “destroyed” under rules dreamed up by Brussels bureaucrats, ministers warned yesterday.
Pensions Minister Steve Webb fears the so-called “Solvency II” rules could prove the final nail in the coffin for the few remaining schemes in the private sector.
In a hard-hitting speech, Mr Webb said the rules will burden final salary pensions with a 100billion bill which would trigger massive numbers of closures of schemes.
This would be a crippling blow for workers relying on their pension to give them a comfortable retirement.
Mr Webb said: “What is being done in the name of protection could mean the destruction of some of the best British pensions.”
He said he was prepared to wage war for as long as it takes to stop the rules from coming into force in this country. He added: “I am determined to do all I can to ensure that this does not happen.”
Britain is already split by a growing pensions apartheid, with the public sector enjoying generous pension schemes guaranteed by the taxpayer, unlike those in the private sector.
A typical State worker retires on a pension worth around 7,850 a year. /12/08/article-0-0EFFD3CD00000578-985_468x286.jpg” width=”468″ height=”286″ alt=”Pension apartheid: Despite recent strikes in the UK public sector workers enjoy pension schemes guaranteed by the taxpayer, unlike those in the private sector” class=”blkBorder” />
Pension apartheid: Despite recent strikes in the UK public sector workers enjoy pension schemes guaranteed by the taxpayer, unlike those in the private sector
In 1967, 8.1million private sector workers had a gold-plated pension, known as a defined benefit scheme. Today this has slumped to 2.3million.
Under the European Commission”s Solvency II proposals, huge new burdens will be imposed on pension schemes in this country.
They will have to inject up to 100billion of extra money into the schemes in order to provide an additional safety net –an extra bill which Mr Webb said will persuade many companies to simply give up on their pension scheme.
He and many other pension experts say the plan is ridiculous because British pensions are already much safer than many others in Europe.
Unlike other countries, the UK has the Pension Protection Fund, which promises to pick up the pensions bill if a company goes bust.
Mr Webb argued the extra burden would mean less money to create new jobs.
He said: “This would have a massive impact on growth and our economic recovery. This is a 100billion tax on growth.”
“Theseplans would ramp costs up dramatically. Businesses struggling with a flat-lining economy would suddenly have to pump billions more into theirpension scheme.”
Joanne Segars, chief executive of the National Association of Pension Funds
The European Commission is planning to publish its draft legislation for Solvency II, which would treat pension funds more like insurance companies, next autumn.
Joanne Segars, chief executive of the National Association of Pension Funds, said: “Final salary pensions are already under huge pressure and this is the last thing they need.
“These plans would ramp costs up dramatically. Businesses struggling with a flat-lining economy would suddenly have to pump billions more into their pension scheme.
“This would mean less money for jobs and investment, at a time when the economy desperately needs both.
“Firms would be so badly hit by these new rules that they would simply shut these pensions down altogether.”
Tom McPhail, head of pensions research at the financial advisers Hargreaves Lansdown, said: “The British pension system is more sophisticated and safer than those in Europe.
“European regulations are being imposed on us when we don”t need them. This will just accelerate the closure of the few remaining good British pension schemes.”
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