European Commission must change course to avoid devastating UK pensions

The pressure on the European Commission has continued to mount over its proposals to codify the valuation of funded DB pension fund assets and liabilities across the continent, and to apply Solvency II-style solvency capital requirements on funds.

Analysis last month by the Pensions Regulator showed that, in the most likely scenario, fund deficits would increase by £150 billion. This arises simply from a change in the calculation of technical provisions, which adds £500 billion to deficits. The Regulator is allowing, however, the full amount to be offset by £350 billion, that is, its estimate of the value of sponsoring employers’ role. The EU quango responsible for the proposals, the European Insurance and Occupational Pensions Authority (EIOPA) recently admitted that how to value sponsor support requires far greater consideration.

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Image: Sebastien Bertrand