EU red tape is 'hitting pensioners hard' as payouts are hammered by Brussels regulations

Those retiring since 2012 are getting around 20 per cent less from an annual annuity than those outside Europe because of EU regulations.

It has led to claims Britons are being ripped off, with Brussels bureaucrats once again interfering in British affairs.

Under the Solvency II directive, insurance companies, including pension providers, must keep a lump sum in reserve to ensure they can always meet claims.

There are similar rules in the United States but the amount kept aside as a buffer is much smaller, meaning there is more money available for customers.

Although the risks are slightly higher as a result, American ­pensioners pocket around £1,000 more a year than people of retirement age in the UK. The average British private pension annuity is around £5,700-a-year.

Alan Higham, retirement ­specialist at fund management firm Fidelity, branded it “financial health and safety”.

He said: “British pensioners are getting much less as a result of this. I was amazed when I saw how much it actually is.

“In effect, British pensioners are paying for the insurance companies’ extra security and getting much less than their American counterparts.

“We need to ask is this reasonable or are we being overly cautious and is the British pensioner being ripped off.” The Solvency II directive will not officially be passed until 2016, however experts have criticised regulators for implementing the stringent rules in the UK since 2012. 

It requires insurance companies to keep putting aside a reserve of money to ensure they can meet all payments and claims.

British insurers expect the average worker to be retired for 18 years and base their annual annuity payout on that.

Anyone who lives longer will be effectively paid from shareholders and insurance companies’ pockets, meaning firms hold huge funds in reserve to guard against going bust.

However, Mr Higham said that as US insurers do not put as much aside, an ­annuity pays seven per cent ­ compared with just six per cent in the UK.

He said: “It is the result of regulators in the UK like the Financial Conduct Authority and the Prudential Regulation Authority taking an aggressive stand implementing these rules and is leading to a huge shortfall in terms of what people could get from an annuity.

“I am unsure that people are living that much longer in the UK than in the United States meaning we need to have such greater precautions. It is like thinking about putting up a building, how much concrete do you actually need to put into the foundations, and how likely is it that the building will fall down.

“I think an annuity in the UK is much less value for money, whereas the Americans are getting a reasonable return.”

The claims add more weight to the Daily Express crusade to Get Britain Out Of The EU.

Pensions expert Dr Ros ­Altmann, the Government’s Business Champion for Older Workers, said insurance companies were using Solvency II as an “excuse” to keep profit margins high.

She said: “The insurance companies could offer better rates on their annuities but they are taking the profits instead. Solvency II is ­making it easier for ­insurance companies to get away with it because they have an excuse.

“The pressure on companies to offer good-value annuities is nowhere near what it is in the States. UK pensions need proper investigation.”

Ukip financial affairs spokesman Steven Woolfe said: “This sort of red tape damages consumers, it does not help them.”

An FCA spokesman said: “We have done some work into the annuities and found they are not delivering as they should be. We will be publishing more work next year on retirement income.”