UK – The National Association of Pension Funds has expressed concern about the impact of the European pensions directive on the UK.

The NAPF sees the directive - Institutions for Occupational Retirement Provision – as part of a series of developments such as the Pensions Bill, the Pension Protection Fund and the new Pensions Regulator that may inadvertently threaten occupational pension provision in the UK.

“More worryingly, the EU pensions directive includes the requirement that technical provisions are covered by sufficient and appropriate assets ‘at all times’,” the NAPF said in a paper called ‘Defined Benefit Pension Schemes and the Law of Unintended Consequences’.

It said: “While something less than full-funding is permissible for a ‘limited period’, there can be no legal certainty until tested in court that the EU pensions directive’s ‘limited period’ is consistent with the Pensions Bill’s recovery period.

“This period is not yet specified but, depending on ‘the nature and circumstances of the scheme’, it was initially envisaged by the DWP [Department of Work and_Pensions] that the recovery period could potentially extend over active members’ average expected future working lifetime.

“It is unclear whether the directive will frustrate the original intentions of the DWP in this area.”

The NAPF said the government may not wish to risk legal challenge in the European Court of Justice on the implementation in the UK of the Pensions Directive requirements.

The NAPF said the Pensions Bill’s funding requirements have had to be modified to satisfy the requirements of the directive – “and the devil is in the detail”.

It said the bill includes obscure Eurospeak expressions such as “technical provisions”. And schemes are required to hold “sufficient and appropriate assets” – which the NAPF called “a delightfully vague expression, if the context were not so serious”.

NAPF chief executive Christine Farnish has written an open letter to chancellor Gordon Brown and pensions minister Andrew Smith about the overall impact that the current regulatory regime are likely to have on DB pensions.

She urged policy makers to “carefully consider the likely overall impact and unintended consequences o current changes to the regulatory regime before brining the new measures into force”.

“Unless this is done, more modern forms of risk-sharing in the delivery of retirement savings to millions of citizens are likely to be stillborn”.