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The EU's pensions vendetta

The EU’s latest pensions directive is a direct threat to the dwindling number of final salary schemes in Britain. Using what is known as MiFID II – the Markets in Financial Instruments Act – the European Insurance and Occupational Pension Authority (EIOPA) called for each final salary scheme to be treated as if it were an insurance company.

This would further pump up deficits so that Britain’s private companies, which by now had mostly closed their final salary schemes, would still face mounting deficits for past service pensions going back over the time when the schemes were open.

Having destroyed final salary schemes for the future, EIOPA wanted to leave its mark by pushing British companies with past final salary schemes into greater financial straits – or to at least make them as uncompetitive as possible. Critics describe MiFID as “reckless prudence”.

As things stand MiFID II will need to be moved into British law by 3 July 2017 for it to apply in Britain from 3 January 2018, unless the terms of Brexit are agreed before then. This raises the likelihood that Britain will have to comply with the wider aspects of MiFID II legislation for a period of time before negotiations on leaving the EU are completed.

But just before the Brexit vote it was agreed that final salary pension schemes (there are very few in the EU – the vast majority are in Britain) should for the time being be excluded from the MiFID II Directive. But this has not prevented the EIOPA fanatics from still lobbying for Britain’s schemes to be included at a later date and was, until the Brexit vote, an ongoing stand-off.

• Related article: Pensions after Brexit