UK/EUROPE – The Myners report on the £800bn UK pension market has urged the UK government to challenge the funding proposal in the EC directive on occupational pensions, saying it risks repeating many of the shortcomings of the UK’s MFR system – itself to be scrapped.
Under the proposed directive, funds would need to determine technical provisions and ensure that they either have what the Commission calls ‘appropriate assets’ or set up a scheme to tackle any potential underfunding.
The report, by Gartmore chairman Paul Myners, concedes the directive is by no means finalised but warns that, if passed, the funding requirement risks distorting investment patterns the same way MFR did. “Like the MFR, it would risk harming pensioners by causing their pensions to be invested in a suboptimal way without actually providing improved protection,” says the report.
Ratification of the directive in its present form would invalidate one of the Myners report’s most important recommendations- scrapping MFR, something Chancellor Gordon Brown has subsequently pledged to do.
The review recommends that the government should continue to take a close interest in the European debate on pension provision. “The government should make the case in Europe that such standardised requirements are flawed and counterproductive, and are not in the best interests of pensioners,” says Myners.