Corporates unprepared for pensions directive
ABN Amro has warned that most UK companies are unaware of the impact that the EU Pensions Directive will have on their finances. The Directive, which comes into force a year from today, sets out a new regulatory framework for defined benefit pension schemes. The Directive requires that companies have sufficient ?technical provisions? ? enough money to provide for the pension scheme benefit payments. The directive also stipulates that, should deficits arise, they must be removed over a ?limited? period.
Companies' lack of preparation isn't helped by uncertainty over the interpretation of the Directive. Head of actuarial at ABN Amro Francis Fernandes said: ?With only 365 days to go, UK companies are still waiting to see the detail of two of the key requirements ? the prescribed assumptions for calculating technical provisions and the maximum period over which any resulting pension deficits can be removed.?
Fernandes thinks that, as finance directors and corporate treasurers decide on their budgets for the year ahead, it is important they are made aware of the potential cash calls as soon as possible. ?For some, the hike in contributions may simply be too much,? he warned.