European pension proposals that will force employers to make bigger contributions could increase UK pension fund deficits to at least £450 billion, the National Association of Pension Funds (NAPF) has warned.
The European Commission has proposed the introduction of Solvency II type rules to defined benefit (DB) schemes to protect members’ savings. Solvency II is capital requirement regulation that was implemented for insurers last year.
The European Commission wants parts of Solvency II to form the centrepiece of a new pensions directive. The rules would increase the funding levels required for pension schemes.
But the NAPF warned moving to Solvency II-type rules would put a huge burden on remaining UK final salary pension schemes and the businesses that run them.
Minister for pensions, Steve Webb (pictured), said: "The EU's latest figures show the extremely high cost its plans would place on UK defined benefit pension schemes.
"This confirms that any such new rules would harm businesses' ability to invest, grow and create jobs, and many more schemes could be forced to close. I continue to urge the Commission to abandon these reckless plans."
He added the EU's estimate of a £450 billion deficit was "in line with the worst case scenario" envisaged by the Pensions Regulator.
Joanne Segars, chief executive, NAPF, said: "The EU plans for UK pensions come with a clear and unpalatable price tag. Businesses trying to run final salary pensions could be faced with bigger pensions bills to plug an astonishing £450 billion funding gap. This would have a highly damaging effect for the retirement prospects of millions of UK workers.
"This project has been conducted at breakneck speed due to the Commission's ludicrously tight timetable. This cannot be the basis for formulating a policy that could undermine the retirement plans of millions of people, both in the UK and across Europe.
"The European Commission needs to rethink its proposals, instead of trying to hurry them through. It would be better to focus on the 60 million EU citizens who have no workplace pension, instead of eroding the good pensions already in place."