Solvency II – UK DB schemes escape the noose

A consultation paper on Solvency II published by the European Commission could represent a reprieve for UK companies sponsoring defined benefit (DB) schemes which had been threatened with insurance style funding requirements.

The Commission’s consultation paper on extending Solvency II to occupational pension schemes discusses the idea only in relation to:

schemes which carry out cross border activities and
schemes which underwrite risks linked to death, disability and longevity or provide an investment guarantee without recourse to a sponsoring employer (known as “regulatory own funds”).

According to the legal advice which the government has received, most UK DB schemes do not fall within either category.

Chinu Patel, a senior consultant at Watson Wyatt, said: “Unless the legal advice the government has received is wrong, the overwhelming majority of UK employers should be unaffected by these proposals.”

http://ec.europa.eu/internal_market/consultations/docs/occupational_retirement_provision/consultation_en.pdf