|
||||||
|
|
|
|
|
|
|
|
|
 |
 |
 |
 |
|
 |
United
Kingdom: Brussels raises pressure on pension plans
Occupational pension
schemes in Britain face a major threat from European Union legislation,
which could force even more schemes to close, the National Association of
Pension Funds has warned. New EU rules, which
must be implemented within the next two years, will force occupational
schemes to be fully funded at all times, only allowing underfunding for a
"limited", as yet unspecified, period. It means that companies
will have to be able to meet all of their pensions’ liabilities at any
time, putting much greater strain on resources. Christine Farnish, the
chief executive of the NAPF (National Association of Pension Funds), said
this could have a "huge consequence" for British company
schemes. She said: "The UK has to implement this directive.
Continuing to provide a defined benefit pension is a hugely costly
undertaking for any supervising employer. "We know a number
of firms have closed their schemes to new members but our concern is that
greater numbers will also close to future accruals because of these extra
costs. It is unquantifiable, and finance directors do not like having that
sort of risk on their balance sheets. "It is very
dangerous and very costly to UK schemes, and because the rules cannot be
scheme-specific, will no doubt lead to endless battles in the courts. It
is ridiculous; it is not in the real world." The NAPF has already
seen 7pc of schemes close to new accruals - where existing members of the
final salary scheme are no longer allowed to pay in and pension benefits
from that scheme are frozen - in the past year. This is up from 1pc the
previous year. Another 8pc of scheme managers have said they are
considering taking this action. One in four companies have closed their
final salary schemes to new members in the past year, the NAPF said. A spokesman for the
TUC (Trade Union Congress) said: "We will be studying this proposal
in detail. Any proposal for ensuring pension scheme funding must
concentrate on the real long-term liabilities, not the day-to-day
movements of investments." The Department for Work and Pensions has
been consulting with the industry about the implications of these new
rules, which should be included in the upcoming Pensions Bill. Its publication is
expected in January, according to the DWP, but has already been delayed
for a number of months. Ms Farnish
said she does not expect the Bill "before late January at the
earliest." The EU directive 2003/41/EC "on the activities and
supervision of institutions for occupational retirement provision"
will come on top of extra costs faced by occupational schemes because of
pension changes already planned. The Pension Protection
Fund, essentially a safety net designed to catch those who lose out if
their scheme is wound up without enough money to meet its liabilities,
will be funded by a levy on occupational schemes. In addition, a new
pensions regulator, which will replace the Occupational Pensions
Regulatory Authority, set up along the lines of the Financial Services
Authority, will also need to be paid for. Ms Farnish added:
"The Government needs to think long and hard about what it wants to
see in this country." A spokesman for the
DWP (Department for Work and Pensions) said: "We can take into
account the view of people affected by this, and people who have an
interest in how the directive will affect them. I am sure the NAPF will
have made their concerns known to us. We will take them on board."
Copyright
© 2002 Global Action on Aging |
