UK - Proposed European Union (EU) pension regulations would add significantly to business costs and harm prospects for investment in infrastructure at a time when the UK Treasury is trying to encourage pension schemes to invest in local infrastructure projects, a new survey has found.
According to the survey by the Confederation of British Industry (CBI) and Towers Watson, the cost and uncertainty of managing defined benefit (DB) schemes were holding back business activity and harming their ability to grow.
It found 69% of business leaders surveyed were concerned about the prospect of the EU enforcing high deficit payments over a shorter period of time, a result of the Solvency-style rules being discussed in Brussels.
Additionally, company managers in the UK remained concerned about the level of funding within DB pension schemes, with 85% of businesses concerned that market fluctuations could further harm funding levels.
Katja Hall, the CBI's chief policy director said: "Large and unpredictable liabilities are also harming firms' ability both to attract investment to grow the business, or to restructure to cope with difficult times.
"What's completely unacceptable is Brussels' plan to impose further costs on firms operating defined benefit pensions at a time like this, when the protection in place has already proven itself during the economic crisis."
Hall had previously said that Solvency II regulations would cause a "massive" flight from equities, with funds forced to focus on fixed income over investment in the stock market.
The report also suggested that the Pensions Regulator must show it understands the added costs and risks as firms negotiate new deficit recovery plans.
However, the study also insisted that businesses in the UK remained satisfied with the Regulator's interaction with their company - against 12% who were unsatisfied - and argued that the positive balance of +32% reflected the additional flexibility the Regulator gave firms to cope during the recession.
John Ball, UK head of pensions consulting at Towers Watson said: "The euro-zone crisis underlines how unforeseen events can increase the cost of pensions promised in the past.
"For employers, the focus is now on locking these costs down and getting ready to seize opportunities to do that as they arise."
Finally, the survey showed that 73% of employers were ready to support proposals to move to a single-tier State Pension, which the survey believed would persuade more staff to contribute towards a private pension as it would be clearer to employers how much they could expect to receive from the state on retirement.
"But business leaders are clear that this change can only come about if the government allows schemes to reshape themselves to adapt to the new regime", Ball concluded.
"Simply abolishing contracting out - essential to a single state pension - would increase employer costs and reduce scheme member take home pay. This can be avoided by allowing schemes a one-off opportunity to adapt, and 60% of firms say that would be their preferred solution."