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Eu's Nail In Coffin Of Uk Final Salary Pensions

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European Union pension rules could spell the end of final salary schemes in Britain, experts warned last night.

Hundreds of employers may be forced to abandon their schemes under planned Brussels regulations that critics say will push up the cost of administering funds by up to 90%.

The National Association of Pension Funds warned the plans would be the 'final nail in the coffin' of final salary pensions.

European Commission proposals would force employers to pay in huge extra sums to reduce the risk of pension funds collapsing.

The plans are designed to protect workers from rogue and negligent employers. But experts warn they could have a devastating impact in the UK, which already has tough pension protection rules.

NAPF chief executive Joanne Segars, whose organisation's members control pension assets of £950bn, said the proposals were 'inappropriate' for the heavily regulated British pensions system.

She warned that the potential rise in costs would force many employers to reconsider whether they could still afford to run socalled defined benefit schemes, which guarantee staff a pension worth a fixed proportion of their final salary on retirement.

Miss Segars said: 'If we were to add a whole extra layer of protection it would simply make it more expensive to provide pensions. You would see many employers decide it is just too expensive to continue with defined benefit schemes.

'The result is that the EU has the laudable aim of providing protection for working people.

'But the unintended consequence if these proposals come into force will be that many working people will lose out.' Under the proposals, pension providers will be put in the same risk category as insurance companies and forced to salt away huge sums to deal with potential emergencies.

Experts say the comparison is unfair because, unlike insurance firms, retirement funds typically face predictable outgoings. Pension providers say the precise financial impact is difficult to predict.

But one study by actuarial consultants Punter Southall suggested the introduction of a so-called 'solvency buffer' could increase the cost of running a typical final salary scheme by 90%.

The EC plans, which are scheduled to be introduced at the end of next year, are also designed to improve 'fragmented and incomplete' pensions regulation across Europe.

Final salary schemes have been in decline for years with only about 21% of private sector employees now members of one.

The warning came as it emerged that millions of public sector workers will be forced to contribute more to their final salary schemes.

A Treasury consultation to be launched in the coming weeks is expected to call for public servants to increase their contributions by 50% to reduce the crippling burden on the taxpayer.

On average, they contribute just 6% of their salaries to pension schemes. This would rise to 9% under the plans, which the Treasury believes could raise £2.8bn a year.

Pensions expert Ros Altmann, of Saga, said current contribution rates in the public sector are 'divorced from financial reality'.

Meh. Won't affect those getting pensions now, not unless we have a complete meltdown.

Feel sorry for all the working stiffs now though, especially those just getting into the game.

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Meh. Won't affect those getting pensions now, not unless we have a complete meltdown.

Feel sorry for all the working stiffs now though, especially those just getting into the game.

"European Commission proposals would force employers to pay in huge extra sums to reduce the risk of pension funds collapsing.

The plans are designed to protect workers from rogue and negligent employers."

Oh dear the EU's taken away the pension industries little ray of sunshine, now they won't be able to justify scamming funds to pay their extortionate fees, when you look at the recent reports that the average 60 year old Brit has a pension pot of just 10k and that in some EU countries someone paying the same amount as a Brit will end up with up to 50% bigger pension pot you can only conclude this is yet another example of rip off Britain (How else did we get to a situation where "my house is my pension").

What with the recent Panorama report revealing high fees, I can only hope we get more EU legislation that our Government are too scared to bring in (probably couldn't get permission from the pension industry :angry: )

High fees in UK pension plans can cost thousands: we need to look to Europe to find better ways of managing pensions

http://blogs.lse.ac.uk/politicsandpolicy/?p=5198

"In October, the BBC’s Panorama highlighted how high fees among UK individual pension plans may significantly decrease workers’ pension pots, leading to future pension benefits that will not be enough to cover their basic needs once retired. These fees may represent up to 80 per cent of the total money paid into a fund. "

Edited by madpenguin

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"Hundreds of employers may be forced to abandon their schemes"

Really :blink: I get a funny feeling most will be more than thrilled with this news. Most are trying to can them anyway.

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"Hundreds of employers may be forced to abandon their schemes"

Really :blink: I get a funny feeling most will be more than thrilled with this news. Most are trying to can them anyway.

Sure they will be overjoyed at the prospect.

A number of European countries make it compulsory for companies to provide a pension, EU should have made that part of the deal, then you'd have heard the squealing from UK firms

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I am guessing your OP refers to Solvency II rules.

However Webb rejected the UE proposal, as it would apply to pensions. So this thread may be a non starter.

http://www.citywire.co.uk/new-model-adviser/webb-rejects-eu-proposal-for-solvency-ii-to-apply-to-pensions/a449290?ref=new-model-adviser-latest-news-list

EDIT:

By the way. Solvency II allows for bodies to create and apply their own 'model' based on the risk perceived. So even if it had been followed through, the impact would unlikely to have been severe. The model would have been customised to such an extent as to make it pointless.

Edited by Redcellar

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I am guessing your OP refers to Solvency II rules.

However Webb rejected the UE proposal, as it would apply to pensions. So this thread may be a non starter.

http://www.citywire.co.uk/new-model-adviser/webb-rejects-eu-proposal-for-solvency-ii-to-apply-to-pensions/a449290?ref=new-model-adviser-latest-news-list

EDIT:

By the way. Solvency II allows for bodies to create and apply their own 'model' based on the risk perceived. So even if it had been followed through, the impact would unlikely to have been severe. The model would have been customised to such an extent as to make it pointless.

Shame, might have known it was too good to be true, pensions are one area that are in drastic need of a clean up.

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Shame, might have known it was too good to be true, pensions are one area that are in drastic need of a clean up.

...and in any case, it seems to me that the EU rules would only have affected employer-run defined benefit schemes, requiring them to hold more money. The beef you have is that investment managers of individual pensions skim too much in fees - a rather different issue that these rules aren't meant to address.

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  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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