European plans to impose “damaging and reckless” new rules on pension scheme funding have been shelved.
Pensions Minister Steve Webb welcomed EU Commissioner Michel Barnier’s decision to postpone plans to impose the rules, known as Solvency II, on defined benefit (DB) pension schemes.
Fears had been raised that the rules would add as much as £400bn on to UK pension shortfalls.
Last month, the Pension Protection Fund calculated that the aggregate deficit of 6,316 defined benefit (DB) schemes – representing about 12 million members – had shot up to £236.6bn in March from £201.5bn in February.
The number of schemes in deficit increased to 5,080 – accounting for 80.4 per cent of the total DB schemes in the PPF. The deficit is worse than last year, it said, when a deficit of £204.2bn was recorded at the end of March 2012.
The European Insurance and Occupational Pensions Authority (EIOPA) had been looking at rules to assess the solvency of pension funds, which providers said would ramp up their costs as more funding would need to be injected.
The Commissioner said he will not present proposals this autumn to bring in new capital requirements for occupational pensions, though he would focus on governance, transparency and reporting requirements.
The National Association of Pension Funds (NAPF) said the Solvency rules will become a task for the next commissioner who takes office in November 2014.
Minister for Pensions Steve Webb said: “This is a welcome move by the Commissioner, and is hopefully a sign he may eventually abandon his damaging and reckless plans altogether.
“Introducing Solvency II-style rules for defined benefit pension schemes would push up liabilities by up to £400bn, harming businesses’ ability to invest, grow and create jobs, and put more schemes at risk.
“The UK has been making the case against the plans for some time, with growing international agreement. The signs are we are winning the argument.”
The Government recently launched landmark reforms which will eventually see up to 10 million people automatically enrolled into workplace pensions to tackle the pension savings crisis amid fears people are not putting enough cash aside for their old age.
James Walsh, EU and international policy lead, NAPF, said: “The great diversity of pension systems across the EU makes it very difficult to devise a ‘one size fits all’ system.
“We welcome Commissioner Barnier’s sensible decision not to go ahead with new rules on pension scheme funding.”