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EC pay back demand a threat to Britain’s pensions industry
27 Oct 2009Brussels interference over the bond repayment commitments of Britain's bailed-out banks could cause a crisis in the retirement savings industry, leading pensions groups have warned
The European Commission is demanding severe remedies at the likes of Royal Bank of Scotland and the Lloyds Banking Group over the amount of state aid they received during the banking crisis.
That includes demands that taxpayers be paid back ahead of the holders of bonds.
The bond market is already pricing in the belief the two banks will renege on commitments to pay the coupons, or annual interest, on up to £20 billion of bonds.
But if payments from the banks disappear, that could lead to a big drop in annuities as such pensions are linked to bond income.
It is reported Aviva has reduced payments to 76,000 of its investors by a fifth because of the suspension of bond income elsewhere.
