Pensions World

Widely quoted estimates of a £600billion bill on UK companies as result of solvency proposals affecting European pension schemes from Brussels could in fact be as much as £1,000bn according to JLT  Pension Capital Strategies.

Commenting on the proposals, Charles Cowling, Managing Director, JLT Pension Capital Strategies, said: “The latest pension proposals from Europe are looking to make members' benefits absolutely safe and guaranteed in all circumstances. This might be a laudable aspiration, but the harsh reality is that absolute guarantees are very expensive - particularly in current nervous market conditions.

He added: “Forcing UK companies to make additional pension contributions of up to £1,000bn would clearly be disastrous for our economy (and the employment prospects of pension scheme members) and politicians from all countries must realise this. However there is significant momentum behind these proposals from Brussels - and for some good reasons (nobody wants to see members lose their savings in a pension scheme failure).

“It is probably too late for this Pandora's Box to be closed. Probably the best (and likeliest) outcome for UK companies is to plead for a (very) long transition period - possibly as much as 20 years.  A 20 year transition period for new solvency regulations would give time for companies to achieve an orderly exit from their pension obligations with limited damage on our economy - leaving DB pensions for the privileged public sector.       

“This debate will not go away and the onus is now on companies with large pension obligations to accelerate plans for managing their way out of these very expensive liabilities.”