The National Association of Pension Funds (NAPF) warned it would also lead to the closure of more final salary pensions in the private sector.
The NAPF issued a stark warning in its response to the European Insurance and Occupational Pensions Authority (EIOPA) on the review of the Institutions for Occupational Retirement Provision (IORP) Directive.
To enhance the security of occupational pensions across EU member states, EIOPA is proposing the application of a 'Solvency II type capital regime' to assess the solvency of pension funds.
Under this system, which has been designed for insurance companies, pension funds would be required to increase their funding levels, making the provision of pensions much more expensive.
This would lead to employers paying more at an already difficult economic time, leaving them with less money for investment and job creation.
PwC's estimate for cost for UK business if the rules were implemented is up to £500 billion, depending on how much leeway there is for healthier businesses.
EU proposals to adapt solvency capital requirements to pension schemes could destroy not only defined benefit schemes but any occupational pension provision, whether defined benefit or defined contribution.
PwC believes most companies would look to level down to minimum auto-enrolment requirements, to avoid the capital burdens, which would go with supporting workplace pension schemes under any likely new regime.
Joanne Segars, chief executive of the NAPF, said: "The overall objective to make European pensions more secure is one which we support. But the introduction of Solvency II type rules will have the opposite effect.
"Faced with extra funding demands, many employers will revisit their pension arrangements. And what we are likely to see is the closure of more final salary pensions.
"During these difficult economic times, Europe should focus on fostering growth and job creation. Solvency II type rules would not only put additional pressure on companies that are struggling for survival, but would also force them to divert money away from investment and new jobs.
"The UK pension system already provides a strong system of member protection through the employer covenant, the work of the Pensions Regulator, and the safety net provided by the Pension Protection Fund. We do not need new solvency rules for pensions.
"Any European action on pensions should focus on where it can add value across EU member states. The EU should concentrate on improving outcomes for the 60% of people without access to workplace pensions and on improving governance and communications. The EU should not try to fix a problem that does not exist."
Raj Mody, head of PwC's pensions group, added: "While attempting to improve pension scheme security, these new rules could actually kill off occupational pension schemes altogether. The additional costs for companies would ultimately be borne by individual savers, who would see less generous pensions, whether defined benefit or defined contribution. The plans would therefore work against the initiatives the UK Government is planning to encourage long-term saving.
"We reckon the cost on UK business would be in the range of £250 billion-£500 billion. In terms of the impact on the UK economy this is like wiping out a quarter of the FTSE100."
"Other consequences include a bigger administrative burden for businesses as they seek to prove they can stand by their schemes to face less onerous funding requirements. Even then, the extra capital burden would provide companies with greater desire to remove historic defined benefit liabilities from their balance sheets, causing a surge in pension transfer incentive exercises."
