Regulation killing final salary pension schemes, CBI leader claims

Excessive regulation is threatening the future of the UK’s three million final salary pension schemes, the director general of the Confederation of British Industry claimed today.

Under-pressure businesses need urgent respite from further regulation if a significant number of DB schemes are to survive, Richard Lambert told an audience in London.

‘Pension deficits are back near the top of the corporate worry list,’ Lambert told a conference hosted by consultant Watson Wyatt. ‘There is an incoming tide of complex and expensive new regulation that threatens to drive an extra nail into the coffin of many DB schemes.’ 

In particular, Lambert pointed the finger at new accounting standards which will force employers to make extra provision for their pensions liabilities, as well as new regulatory rules which will impose industry standards for the key individual assumptions used by trustees, such as mortality.

The CBI is also angry about higher levies for the Pension Protection Fund – the pension industry’s compensation scheme for victims of failed firm.

Lambert said firms wanted to preserve their DB schemes, but that the ‘pressure on them is continuing to build.’

‘This spring, we have seen another assault on boardroom confidence,’ he said, referring to the various changes. ‘And the result is growing pressure on the boardroom to be wary of involvement in UK defined benefit – even to avoid it altogether where possible.’

The CBI leader made a number of recommendations to government and regulators on behalf of his members, including:

• A ‘tougher, risk-based approach to future pensions legislation’;
• More stable costs from the Pensions Protection Fund and other regulatory bodies, and
• More freedom for companies to design and manage their own schemes.

‘Without these three simple steps,’ Lambert said, ‘we will see a significantly shorter life for DB accrual than we would all hope for.

‘That would be a matter of great regret to our members. And it would also reflect badly on government, which would face the political fallout from its role in the ending of accrual.’