U.K. government authorities, industry organizations and consultants publicly criticized a European Commission proposal to subject pension funds to stricter regulations currently being applied to insurance companies.
The move followed the publication of a quantitative impact study published on Tuesday by the European Insurance and Occupational Pensions Authority, a European Union government agency that conducted the study on behalf of the European Commission. Preliminary results of the study estimated that aggregate U.K. defined benefit plan deficits would increase to £450 billion ($690 billion). In comparison, the combined deficit was estimated to be about £237 billion for about 6,300 defined benefit plans monitored by the Pension Protection Fund.
U.K. Minister for Pensions Steve Webb in a news release called on the EC to “abandon these reckless plans,” while the National Association of Pension Funds issued a statement saying plans to apply what's known as the Solvency II directive to pension funds comes 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 £450 billion funding gap. This would have a highly damaging effect for the retirement prospects of millions of U.K. workers,” according to Joanne Segars, CEO of the NAPF, in a separate news release. The NAPF represents member pension funds with combined assets of about £900 billion.
Neil Carberry, director for employment and skills at the Confederation of British Industry, added in a separate news release: “EIOPA's preliminary results show the impact of these proposals are even worse than expected.”
Investment consultant Towers Watson also warned in a separate news release that the EC against “producing directives in haste and repenting at leisure,” according to Mark Dowsey, senior consultant. “If the commission embarks on a race against the clock to get a directive nailed down before commissioners change jobs next year, there will almost certainly be important details that have not been thought through.”