British businesses could face a £450 billion bill as a result of plans to force pension funds to protect themselves from risk with extra capital. If the proposed rules were introduced, they would accelerate the closure of Britain’s remaining final salary pension schemes in the private sector. The EU body that regulates occupational pensions estimated that the deficit in the UK’s defined benefit pension schemes would almost double from £237bn to £450bn if the new rules, called “Solvency II”, were introduced.
Steve Webb, the minister for pensions, said: “The EU’s latest figures show the extremely high cost its plans would place on UK defined benefit pension schemes. “This confirms that any such new rules would harm businesses’ ability to invest, grow and create jobs, and many more schemes could be forced to close. I continue to urge the Commission to abandon these reckless plans.”
The National Association of Pension Funds (NAPF) warned that moving to the new rules for pensions would put a “huge burden” on Britain’s remaining final salary pension schemes and the businesses that run them. Joanne Segars, the NAPF’s chief executive, said: “The EU plans for UK pensions come with a clear and unpalatable price tag. Businesses trying to run final salary pensions could be faced with bigger pensions bills to plug an astonishing £450bn funding gap. This would have a highly damaging effect for the retirement prospects of millions of workers.
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