CBI Issues Defined Benefits Warning

A business group has warned the government over what it sees as over-complex proposals for future pensions regulation, which it says could be the "nail in the coffin" for some schemes.

The Confederation of British Industry (CBI) is lobbying ministers over the upcoming laws, which it says makes the collapse of final-salary workplace schemes, and the potential loss of retirement savings, more likely.

Director-general of the group Richard Lambert set out these concerns during a speech to Watson Wyatt.

The new proposed legislation includes forcing pension schemes to make more "conservative" assumptions on the mortality of savers, and for all final salary schemes to include a "worst case scenario" on their balance sheets.

Plans from the Pension Protection Fund to impose a higher-than-expected tax on schemes have also met with resistance from elsewhere in the industry, and have provoked some to suggest that greater rates of buyouts and collapses would result.

Mr Lambert said: "Pension deficits are back near the top of the corporate worry list. There is an incoming tide of complex and expensive new regulation that threatens to drive an extra nail into the coffin of many defined benefit schemes."

"Firms want to preserve their excellent schemes for employees, but the pressure on them is continuing to build. This spring, we have seen another assault on boardroom confidence. 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."

In total, the schemes of FTSE 100 firms lost £30 billion from April to June, registering a deficit of £9 billion by the end of the period. Credit crunch induced volatility on stock markets has been a major factor behind these losses.