UK - European Commission proposals for an adjusted version of Solvency II standards for pension schemes could cost Britain £500bn if they are implemented, the Confederation for British Industry has warned.
The comments come after the Commission launched a Green Paper on pensions - reopening the issue of solvency standards in pension schemes, and considering the possibility of adopting an adjusted version of Solvency II - yesterday (GP Online, yesterday).
The CBI said its figure represents the extra funding schemes would need to find to meet the additional solvency requirements under these proposals.
CBI deputy director-general John Cridland said: "We are particularly disappointed by misguided proposals to apply insurance-style funding rules to pensions. These could force British companies to put about £500bn of extra money into their final salary pension schemes.
"The Commission is seeking to treat pensions in the same way that it deals with insurance schemes - as if they could suddenly face large, unexpected demands on their capital. In fact, pensions pay out over time in fairly predictable ways."
Allen & Overy pensions partner Neil Bowden said the paper added "fuel to the debate" on solvency standards in pension schemes.
He also criticised the Commission for "throwing everything into the pot" of the Green Paper, rather than dealing with "unfinished work" on the IORP directive.
"Final salary schemes are still threatened by the application of insurance-style funding requirements under Solvency II rules, which would increase costs significantly for sponsors," he added.
PricewaterhouseCoopers pensions partner Marc Hommell said the proposals could signal the end of final salary schemes in the UK.
He said: "Almost a third of companies have already closed future accrual of defined benefits to existing employees, and a further one-third intend to do so in the near future. If the EU proposals were to apply to the UK, the remaining third of companies who have decided to continue defined benefit accrual will quickly diminish to zero."
National Association of Pension Funds chief executive Joanne Segars warned a "one-sized-fits-all" approach would not work.
"Europe has a patchwork of very different pension arrangements and a one-size-fits-all approach will not work.
"The UK already has a sound regulatory regime, supported by The Pensions Regulator, so the EU should think carefully before proposing new regulations."
She added: "The EU's suggestion of applying the funding model used for the insurance industry to pensions would be inappropriate and could cause serious problems. And unlike insurance companies, UK pension schemes have access to the ongoing support of the employer and, if that fails, the Pension Protection Fund."
Despite this Towers Watson said, while much attention of the consultation paper from the European Commission is being focused on the development of a Solvency-II based regime for pension funds, the paper also marked an important step forward for cross-border pension schemes.
Senior international consultant Paul Kelly said if the Pensions Directive is amended as the EC Green Paper implies, cross-border pension plans could develop further to become a mainstream feature of the European pension landscape.
He said: "The Green Paper's suggested improvements to the Directive have the potential to significantly improve the European pension landscape and the EC's review is a welcome catalyst."
The top stories this week were the High Court's decision to block the £12bn annuity transfer from Prudential to Rothesay Life, and a separate court ruling that 'raises the bar' for pension rectification exercises.
Guaranteed minimum pension (GMP) equalisation has soared to the top of pension schemes' to-do lists, with 58% stating it is a priority project, research from Equiniti has revealed.
Professional Pensions is holding its defined contribution (DC) conference on 4 September.