Tuesday 24 April 2012

The Express, Europe and pensions

Two of the subjects that frequently appear on the front page of the Express are Europe and pensions. Today, they both appear in one headline:

Regular readers of the Express may feel they've heard this before. For example, on 15 March 2012:

Today's article, echoing the March one, claims:

Meddling European bureaucrats are threatening to kill off Britain’s final salary pension schemes.

They want to impose tough financial rules on them that would cost up to £600billion.

But few employers would be able to afford the terms and most would be forced to close the schemes, according to experts.

The so-called Solvency II rules, which would affect about 6,400 workplace schemes in Britain, are designed to bring them into line with other European countries.

Then, as now, there are no firm proposals on the table. The Express claims the rules will be 'Solvency II'.

But following the 15 March article, the EC Representative in the UK said:

“Europe” is not considering extending the Solvency II rules for the insurance industry to pension funds in a way that would force the closure of final salary pension schemes.

Articles (14 Feb) in the Daily Express, the Daily Telegraph and the Independent paint an incomplete and sometimes misleading picture.

There is a current review of the rules applying to pension funds. But the Commission will not put forward proposals for some months yet.

Those proposals will definitely not “cut and paste” Solvency II provisions into pension rules. They will be based on detailed impact assessments and will be designed to make pensions safer – so that people do not contribute for many years and then lose out – without undermining the supply of occupational pension provision.

Internal Market Commissioner Michel Barnier has made a comprehensive public statement (10 Feb) on these issues, regrettably not referred to in any of the articles. It is available on his website.

The proposals will of course only take effect if agreed by a majority of MEPs and a “qualified” (i.e very large) majority of Member States. The UK has never in EU history been outvoted on an item of financial regulation.

Today's article doesn't quote any of this. It does include this:

Speaking at a public hearing last month Michel Barnier, the European commissioner responsible for internal market and services, acknowledged the “concern” over possible regulatory changes, but he also said there was a need for “robust rules” to protect pensioners”.

But the Express ignores Barnier's more explicit comments on this issue. In February he said (pdf):

To be clear: I have never said or suggested that pension funds should be subject to exactly the same rules as Solvency II. If that had been the Commission's intention, we would have proposed this back in 2007 when we presented the Solvency II Directive. The Commission did not do so for very good reasons...

The proposals I will make before the end of the year will be based on in depth impact assessments. In no way do I want to take actions which could undermine the supply of occupational pension provision. We need pension funds to continue playing their role as long-term investors, as this is essential for long-term jobs and growth.

I am well aware we cannot ask companies in the EU, notably SMEs, to lock up capital in their pension funds. Companies need access to finance to grow and compete in global markets. And I am also well aware that pension funds in different Member States have different features, and I don’t want to penalise well functioning systems...

We will inspire ourselves from the Solvency II approach when appropriate but that does not mean we will "copy and paste" Solvency II. I repeat: I want to maintain a level playing field within the Single Market. This means it is important that the same products and activities are subject to the same requirements, regardless of the structure of the provider. But it does not mean I will propose the extension of Solvency II as such to pension funds.

As with the issue of plastic bags, it seems the Express prefers scaremongering and rhetoric rather than waiting to see what is actually proposed by the EU.

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