New accounting rules will impact on pensions, Allianz say

Wed, 07 May 2008

According to Allianz Global Investors, companies in Europe may need to spend billions of extra euros to service their pension funds, if proposed accounting rules are approved.

The new Solvency II rules could spell the end of defined benefit schemes once and for all. Allianz said companies would have to increase pension funds by 65-70 per cent if the new regulations come into force.

The Solvency II rules would require pension schemes to hold greater levels of capital, leaving firms to pay out on pensions for their employees. Some companies, Allianz warned, would shut their defined-contribution pension schemes straight away. Pension schemes would also have too add in a capital buffer.

Final salary pension schemes are being closed by many UK companies in light of the pressure of maintaining this kind of benefit for employees. New pensions legislation could spell the end of these schemes in the next few years.
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