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EU's 'crazy' pension rules would spell end for final salary pensions and cost 180,000 British workers their jobs
07:36 GMT, 11 December 2012
CBI chief policy director Katja Hall said: 'Imposing 350billion more costs on business would be a disaster for the economy and for pension saving'
‘Crazy’ pensions rules from Brussels could spell disaster for millions of savers and the economy, the CBI warns today.
In a hard-hitting report, the business lobby group said the proposed changes would land British firms with a 350billion bill and cost 180,000 workers their jobs by the middle of the next decade.
Campaigners warned that the European diktat could seal the demise of rapidly disappearing final salary pensions. It comes as the funding black hole in final salary schemes swelled to 61billion, its highest point this year.
The European Commission wants to add to employers’ woes by forcing them to divert huge amounts of money into such schemes. The rules are designed to ensure firms have enough money set aside to continue paying benefits even if they run into financial difficulties.
But the CBI said Brussels meddling would backfire, with Britain’s biggest pensions lobby group also warning the damage to jobs, growth and living standards ‘would be felt for decades’.
CBI chief policy director Katja Hall said: ‘Imposing 350billion more costs on business would be a disaster for the economy and for pension saving.
‘The long-term economic outlook is so fragile and uncertain that it is crazy to entertain proposals which would cost jobs and cut so deeply into our long-term growth and competitiveness.’
Britain’s pension system was once the envy of the world.
But more than 90 per cent of final salary pension schemes in the private sector have now shut the door on new members because of the soaring costs of providing benefits.
Despite this 1.9million people are paying into final salary pensions, which provide a guaranteed income based on length of service and salary at retirement.
The final proposals from Brussels will be published in the spring, with a view to implementing the new regime within the next two years.
Britain's pension system was once the envy of the world. But more than 90 per cent of final salary pension schemes in the private sector have now shut the door on new members
But business groups, campaigners and the Government are desperate for the eurocrats to keep their hands off British pensions.
Dr Ros Altmann, of over-50s group Saga and former Downing Street pensions adviser, said: ‘This is a lose-lose for British pensions and the economy.
‘Far from making pensions safer these rules could end up forcing more companies into bankruptcy. This will cause a significant acceleration in the closure of Britain’s remaining final salary pensions in this country. This really could be the final nail in the coffin.’
Pension funds are a vital source of investment for companies and infrastructure projects, with schemes across Europe holding assets of 3trillion.
But the CBI said the new regime will force employers to invest these assets in safer investments such as cash and gilts, rather than ploughing money into long-term assets such as infrastructure.
According to the CBI analysis, compiled by consultants Oxford Economics, tinkering from Brussels could also slow Britain's recovery from the recession
This would be a blow to the Coalition’s plans to kick-start the economy by securing 20billion from pension funds to finance projects such as building roads and railways.
According to the CBI analysis – compiled by consultants Oxford Economics – tinkering from Brussels could also slow Britain’s recovery.
It predicted annual economic output – or GDP – would be 2.5 per cent lower in the mid to latter part of the next decade if the changes are implemented.
Joanne Segars, of the National Association of Pension Funds, said: ‘These plans would kick our economy when it is down, and the damage to jobs, growth and living standards would be felt for decades.
‘It is incredible that Brussels wants to strip the business world of 350billion of potential investment when there are fears of a triple-dip recession.’
Separate figures published yesterday underlined the strain employers are under, with the pensions deficit for the biggest 350 firms in the UK soaring 6billion in November to 61billion. This is the difference between the amount firms owe staff in pension promises and the value of the assets in their pension schemes.