A European pensions authority report has confirmed that UK pension fund deficits would increase by about £150bn to at least £450bn under Solvency II-type proposals to harmonise regulation across the European Union.
The study prompted the National Association of Pension Funds to renew its call for the new directive to be scrapped. Legislation was postponed in May by Michael Barnier, the EU internal market and services commissioner.
The figures appear in a quantitative impact study delivered yesterday to the European Commission by the European Insurance and Occupational Pensions Authority. This tested, in seven countries, how the so-called holistic balance sheet would impact on Institutions for Occupational Retirement Provision providing defined benefit or hybrid schemes. The proposals impose a solvency capital requirement similar to that being introduced for insurance companies under Solvency II.
In the UK, where there are some 52,000 private pension schemes, the Pensions Regulator carried out QIS calculations for all 6,432 occupational DB pension schemes. These have around £1 trillion of assets and 11.7 million members in total, including 2.1 million active members.
EIOPA's report states that, under the current regime, UK schemes have an excess of assets over liabilities of minus 349.9bn (minus £299bn). But under the benchmark, or average, set of Solvency-II proposals the figure rises to minus 526.5bn.
James Walsh, lead EU policy adviser at the NAPF, said: 'This is final confirmation from the EU's own advisers that Solvency II-type rules would inflict an unpalatable and unnecessary blow on UK pensions.
'It is a relief that Commissioner Barnier has postponed these plans for now, but this report underlines the need for them to be scrapped completely. They must not be revived by the next European Commission.
'Instead EU policymakers should take a step back and think about what the real priorities should be for pensions. Pension funds continue to support the EC's vision of "safe, adequate and sustainable" pensions. We need a clear view of the features that would enable pension schemes to deliver on those objectives.'