Euro MP fights for UK pensioners

Sajjad Karim MEP
Sajjad Karim MEP

NORTH-WEST Euro MP Sajjad Karim and fellow Conservatives in the European Parliament are staunchly resisting EU plans which could affect thousands of pension-holders across the region.

Mr Karim, Conservative Legal Affairs spokesperson in Parliament, said UK pensioners could be hit by a 20% cut in their incomes if planned new EU capital rules for pension funds go ahead. The plans could also force major insurance companies to move abroad.

The EU is finalising proposals for solvency capital requirements for the insurance and pension industry to make the industry financially robust and able to withstand any future financial crisis or stressed market. But Conservatives have warned the so-called “Solvency II” proposals could have unintended consequences and force insurance and pensions funds to hold millions of pounds in extra capital to take into account short-term market volatility, even though they are not exposed to it.

Industry experts also predict this would lead to a massive hike in premiums – or an equally severe collapse in pension values as insurance companies would not be able to absorb the extra cost.

The UK Government and Conservative MEPs are trying to avert the crisis by amending the proposals to recognise the specific nature of annuity pension investments in Britain, which rely heavily on long-term and low-risk financial instruments. They are held to maturity for a fixed income and therefore are not affected by market volatility.

Speaking from Brussels, Mr Karim said: “These proposals have no reflection on reality and do not take into account that Britain’s pension companies operate differently from those of other EU countries. This is yet another example of Europe assuming one size fits all.

“Our pensions are not dependent on the fluctuations of markets or of the wider economy as funds are in France or Germany; therefore they do not need to hold the extra capital required by these rules.

“Additionally, UK annuities prevent the consumer withdrawing the cash from them, so there can be no ‘run’ on these products, as is a danger in other countries. This legislation has been designed to protect consumers, yet the reality is the proposals will hit pensioners hard and responsible companies running currently-healthy pension schemes will be made unprofitable.

“I and my Conservative colleagues will work hard to ensure these proposals are amended to reflect the reality of pension funds in the UK.”