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The Confederation
of British Industry (CBI) has warned that three million defined
benefit (DB) pensions are at greater risk of being wound up early
or bought out because of excessive regulation.
CBI director-general, Richard Lambert, said that the past few months
had seen an increasing number of businesses voicing alarm at the
mounting pressures placed on providers of DB schemes, including
final salary pensions. In addition to these pressures, greater longevity
and the capital market instability associated with the credit crunch
and economic slowdown have had an impact.
Lambert said that businesses need ‘breathing space; from further
regulation if DB schemes are to be preserved, and he fears that
further costs and extra red tape on surviving schemes would force
firms to close their schemes for accrual.
At a Watson Wyatt event, Lambert told delegates: “Pension
deficits are back near the top of the corporate worry list. There
is an incoming tide of complex and expensive new regulation that
threatens to drive an extra nail into the coffin of many DB schemes.
“Firms want to preserve their excellent schemes for employees,
but the pressure on them is continuing to build.”
Lambert proposed that in order to reform the regulatory climate,
the industry must take a tougher, risk-based approach to future
pensions legislation, deliver more stability for firms and give
companies the freedom to design schemes that work and then leave
them to it. The latter, however, will only be acceptable so long
as the funding and covenant is there to meet the promise and scheme
members understand what is on offer.
- Pensions Age
July 2008
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