JPM warns of £600bn cost of European pension rules

JPMorgan Asset Management (JPMAM) has warned that proposed European pensions regulation reforms would cost UK companies £600 billion, adding to industry-wide concerns about the plans.

A JPMAM report has estimated that the proposals, from the European Insurance and Occupational Pensions Authority would require firms to pump £600 billion into corporate pension schemes, representing more than half their current £1 trillion liabilities, according to the Financial Times.

The plans would impose the planned Solvency II capital rules for insurers onto pension schemes, bringing in higher requirements over solvency. Pensions minister Steve Webb has signalled his opposition to the plans, warning they would cost the UK £100 billion and cause companies to walk away from final salary schemes.

But the Confederation of British Industry (CBI) and the National Association of Pension Funds have, like JPMAM, warned that the costs are likely to be much higher.

Paul Sweeting, one of the authors of the JPMAM report, said the £600 billion cost was 'a realistic scenario' if the new plans were imposed. 'It takes a special kind of regulatory nous to create something so hated by so many people,' he told the FT. 'They've got the Trades Union Congress lining up with the CBI.'

Legal & General pensions strategy director Adrian Boulding has previously labelled the plans 'absurd', warning the qualifications and capital reserve requirements imposed under the regime would heap burdens on UK employers already struggling to meet auto-enrolment obligations.