By Ilonka Oudenampsen
Solvency II for pensions would not damage the UK pension sector, European officials told the UK government’s work and pensions committee yesterday.
At a hearing in London, the European Commission’s head of the unit for active ageing, pensions, healthcare and social services Ralf Jacob rejected claims that Solvency II would cost the UK pension industry billions of pounds.
Pensions Minister Steve Webb has previously stated the proposals could mean that companies walked away from final salary schemes, while JP Morgan Asset Management estimated the cost for DB schemes at £600bn.
At the hearing, Jacob said: “I would be surprised if statements on £600bn materialise.
“The objective of this reform is not to damage the pension industry, but to make sure occupational pension funds can thrive.
“We are trying to develop technical specifications that allow us to introduce a risk-based solvency regime in the pension fund sector that does not yet exist.”
The EC’s head of unit for insurance and pensions in the directorate-general internal market and services Karel Van Hulle added that the cost estimations of £600bn are “exaggerated” and that it is not the intention for reform to take aim at any member state or particular industry.
He emphasised that the aim of the reform is to create a level playing field and a means of comparison between pension schemes across Europe, and that a holistic balance sheet solution would reduce capital charges in the UK by considering the position of the sponsoring employer and the Pension Protection Fund.