European proposals to model financial rules for pensions on those established for insurers could stymie investment and make the plans more expensive, according to Mark Hoban, the U.K.’s financial secretary.
Applying capital requirements originally directed by the European Union at insurers to pension funds, “carries a strong risk of locking capital in pension schemes, reducing investment in growth and significantly reducing the affordability of pensions,” Hoban said in a letter to the British Bankers’ Association that was obtained by Bloomberg News.
The so-called Solvency II rules are scheduled for introduction in 2013 and require insurers to retain more high-quality assets.
“As the commission have not yet finalized their proposals, the debate as to how to regulate pensions across Europe remains open,” Hoban said in the letter, dated today and addressed to Angela Knight, chief executive of the BBA.
Prudential Plc’s Chief Executive Officer Tidjane Thiam said last month that tougher capital rules for insurers in Europe mean they won’t be able to compete in the U.S., which may force the U.K.’s biggest insurer to leave the country.
Regulators and the European Union have agreed to postpone full application of the rules until 2014, following discussions with the industry.
“I have never said or suggested that pension funds should be subject to exactly the same rules as Solvency II,” Michel Barnier, the EU commissioner for financial services, said in a statement on his website in February.