UK companies face £15bn pensions payout
Companies will have to contribute an extra £15bn a year to protect employee pensions, adding more pressure on them to close final salary pension schemes, new research says.
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According to HighamNobbs Consulting, companies will have to make this additional payment because the government failed to implement the European Directive 80/987, which protects the pensions of workers at a company that goes insolvent.
Due to the fact that the directive is 20 years old, retrospective claims could top billions of pounds, if a test case is upheld.
Antony Miller, a partner at HighamNobbs Consulting said the government must address two issues: pensioners whose claims were not protected by the EU directive; and it must ensure that it complies with the directive in the future.
To do this, Miller says, the government will force companies to ‘provide necessary funding’ to ensure full benefits are paid in the event of insolvency.
Miller said: ‘Few companies can afford such contributions and the risk that European pressure will prevail is making many companies consider winding up their final salary schemes.
‘This should sound the death knell for final salary pension schemes. Once again the very legislation that is aimed to protect members’ pensions is likely to be their greatest foe.’