Deloitte and PwC are warning that proposed European Parliament changes to remuneration rules for asset managers who manage UCITS funds will see bonuses subject to tougher rules than those paid in the banking sector and pose a risk to UK firms' competitiveness.

The European Parliament has voted in favour of draft rules implementing variable pay caps for UCITS fund managers. These include the requirement for a significant proportion of variable pay to be deferred for three to five years, with a cap on variable pay of one times salary.

Stephen Cahill, head of compensation and benefits at Deloitte, said the cap 'is likely to lead to increases in salary levels across the financial services sector and will increase fixed costs at a time when firms are looking to keep them down.

'These developments are likely to place the European financial services sector at a disadvantage to counterparts in the US and Asia, and will make it much harder for European firms to attract and retain their key talent,' Cahill said.

Jon Terry, partner in PwC's reward team, said: 'UK fund management firms are set to be disproportionately hit by any bonus cap rules as bonuses tend to make up a greater proportion of pay. Many firms will have to completely review how they pay their fund managers and senior staff due to the large proportion of pay that would be affected by any such rules.'

'There is a long way to go to finalise any remuneration provisions and the industry needs to make and strong a persuasive case to significantly water down these proposals or risk being stuck with onerous and restrictive rules,' Terry said.