Pensions minister Steve Webb has poured scorn on EU plans to use a Solvency II-style methodology to measure pension liabilities because it will harm the economy and lead to the forced closure of more defined benefit pension schemes.
His hard-hitting swipe is based on new Department of Work and Pensions research which says the plans will saddle UK employers with final salary schemes with additional costs of around £150bn while those with pension shortfalls could rise by as much as £400bn.
In a speech to the European Retirement Federation in Frankfurt, he said: 'The new figures show us just how devastating the impact of the Commission's wrongheaded proposals would be. A likely outcome of the new rules would be to increase pension liabilities by over £100bn. This would harm businesses' ability to invest, grow and create jobs, and many more schemes could be forced to close.
'We are urging Brussels not to pursue these dangerous, reckless plans. In Britain, we are making reforms to ensure our pension system is sustainable. In Europe, we should be working together to tackle real pension challenges, and find ways of better sharing the risk of providing pensions between the employer and employee.'
Should the Commission propose rules requiring the maximum level of funding, more defined benefit schemes would be forced to close. On the basis of current trends, it is possible that over the next 20 years the percentage of remaining schemes open to new members would be reduced even further, from a current 16% to just 5%, and for those open to existing members from 58% to under 25%.
All private companies with defined benefit pension schemes would be affected. Collectively, such schemes hold half the UK's private pension assets, with total liabilities of around £1,200bn.
The UK government will repeat its mantra that there is no 'one size fits all' model for pensions throughout the EU.