Tucked away in an obscure corner of the FT with a major story in the Express one might not notice this at all. But that’s always happening with the EU and it is only the hard work of pressure groups like Open Europe that half these things ever come to light.
FINANCIAL TIMES 23.6.09
British workers face 20% cut in pensions
By Paul J. Davies, Insurance Correspondent
British workers could see pensions cut up to 20 per cent under European rules that govern insurance company capital requirements.
The pain will be felt by those with defined contribution pension schemes, in which money is used to buy an annuity on retirement, which pays out a fixed income until death.
DAILY EXPRESS 23.6.09
EU WILL CUT YOUR PENSION BY 20%
The stealth tax on pension funds introduced by Brown has been attacked
By Macer Hall Political Editor
MILLIONS of British workers could see their pensions slashed by up to 20 per cent in a devastating new round of meddling by Brussels.
European Union bureaucrats want tighter restrictions on the private retirement funds that most employees will rely on in their old age.
But industry experts last night warned the new rules will shave up to a fifth off the income many will receive in retirement.
The move could also widen the growing pensions gap between public and private sectors.
Millions of state employees, including MPs and civil servants, will be insulated from the effects of the EU measures because they still have gold-plated final-salary pensions underwritten by the taxpayer.
The new EU rules are due to come into force in 2012, devastating the retirement plans of hundreds of thousands of people nearing the end of their working lives.
Pension campaigners and senior MPs were outraged by the latest punishing threat to pensions already decimated by the recession and Gordon Brown’s annual tax raids.
The Government should show some courage and resist this directive before it causes long-term damage to British pensions
Shadow Pensions Minister Nigel Waterson
The move comes as private-sector workers face working longer for less because ministers want to raise the retirement age from 65 to 68 by the year 2046.
Private-sector pension funds have taken a battering over the last decade.
Falling investment returns have meant many firms have closed final-salary schemes because they were becoming too costly to run.
Experts have also attacked the annual £5billion stealth tax on pension funds introduced by Gordon Brown when Chancellor.
Pensions expert Dr Ros Altmann, a former adviser to the Government, said: “The value of pensions will be further reduced by this initiative.
"These changes may be good for many countries in Europe.
"But in our country, because our state pension is so low, people are relying on their private pension for a decent retirement.” [The EU is contyinually trying to make one rule fit 27 doifferent systems. It always causes chaos -cs]
The EU shake-up will affect those schemes where workers pay a proportion of their salary into a pension fund each week or month in return for an annuity on retirement – which pays a fixed income for life.
But the new EU proposals, entitled Solvency 2, are expected to substantially increase the cost of annuities.
Insurers will have to take a greater account of market risks of annuity investments and be expected to raise more capital to underwrite potential losses.
Experts fear pensioners will bear the extra costs through significantly lower payments.
Some insurers believe the new regulations will force firms to put pension cash into safer investment funds, favouring government bonds as an alternative to riskier investments, and reducing the long-term returns on pension investments.
Yesterday the Tories condemned the Government for failing to stand up to interference from Brussels.
Shadow Pensions Minister Nigel Waterson said: “This is another example of how new, ill-thought-through rules from Brussels could have a harmful impact on cash-strapped British pensioners.
"The Government should show some courage and resist this directive before it causes long-term damage to British pensions.”
Critics are concerned Britain will be unable to opt out of the new rules.
Mark Wood, chief executive of Paternoster, a pension buy-out group, said: “If Solvency 2 comes in its current form, then defined contribution pension pots are going to be worth something like 20 per cent less.”
Experts say that the new EU rules were drawn up before the recession and fail to take into account the damage sustained by many funds.