Janice Atkinson for The Daily Mail
14th February 2012
Pensioners in the UK could be hit by a 20 per cent cut in their incomes if planned new European Union capital rules for pension funds go ahead.
The Confederation of British Industry and the Trades Union Congress have written to the President of the EU Commission to warn that its proposals for a new pension fund proposals under the Solvency II rules would impact on British jobs, business and savers.
The letter also warned that, by encouraging pension schemes to invest their money in low-risk government gilts rather than riskier asset classes such as shares, the changes would have an “immediate catastrophic impact on the stability of European financial markets”.
So what are our MEPs and Steve Webb, the Liberal Democrat Pensions Minister, going to do about it?
Well, Steve the Minister has previously said that the new rules are “destructive” and would cost companies £100 billion.
Yet the Liberal Democrat MEPs vote through every piece of legislation put in front of them. The Tories are crying ‘foul!’ but will tinker at the edges and will claim victory when this damaging legislation is voted through, saying that the legislation would have been worse had they not intervened, as they always do.
The plain fact is that the legislation should not be imposed on the UK’s financial markets as our markets are very different in the way that we operate.
The proposals will have unintended consequences and force insurance and pensions funds to hold millions of pounds in extra capital to take into account short-term market volatility, even though they are not exposed to it.
Industry experts predict this would lead to a massive hike in premiums – or an equally severe collapse in pension values as insurance companies would not be able to absorb this extra cost.
Under this proposed diktat insurance companies will be forced to hold millions in extra capital to cover themselves against a risk that does not exist, because our pension companies and company pension funds operate differently from those in most other EU countries. UK annuity products mean that the consumer cannot withdraw the cash, so there can be no ‘run’ on these products, as is a danger in other countries.
The plain fact is that there is nothing we can do to halt this damaging legislation. Under Qualified Voting Majority, a consequence of the Lisbon Treaty, we do not have a majority. It’s time to leave the EU.