Indebted Pension Protection Fund to unveil new funding plan

The Pension Protection Fund is to unveil how it plans to generate the cash needed to meet its obligations to employees.

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by Iain Martin on Aug 25, 2010 at 10:16

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The Pension Protection Fund, the lifeboat which provides compensation to members of defined benefit pension schemes that go into insolvency, is to unveil how it plans to generate the cash needed to meet its obligations to employees.

The PPF was established in 2005 to stand behind the pension obligations of insolvent employers but had developed an £1.23 billion deficit in 2008/2009.

The PPF has been funded by a levy on employers plus investment returns from this income and the assets from pensions scheme that have defaulted. Pensions experts have expressed fears that the levy would become disproportionally large as the number of employers with defined benefit pension schemes dwindled.

The PPF told the Financial Times that it had an 83% chance of hitting its target of 110% of required cash by 2030.

‘There is the idea that one day there will only be one or two large schemes in the UK and they will have to pay the levy for everybody,’ said Alan Rubenstein, chief executive of the PPF. ‘As the levy shrinks, we want to demonstrate that we have a plan in place to be able to pay benefits to all claimants.’

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6 comments so far. Why not have your say?

Nothing to worry about - "they have a plan".

Be nice to know what it was.

Hopefully it is not of the "cunning" (a la Baldrick) variety!

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So the PPF hasn't got enough money in its fund to protect pensions?

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Make an annual 50% levy on the income, salary, expenses and pension of those that caused the problems by voting through the original source of the problem in 1997!

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The PPF is just like any other pension defined benefit scheme. In reality it is just another pension fund that requires contributions which come not from the employer like active schemes, but from defined benefit plans still in existance by way of a levy. Any shortfall in assets, lets call this a deficit for ease of terminology, will need to be made up by either increasing the contributions i.e levy or an injection of assets. It is simply not sustainable to keep increasing the levy and there is route for an asset injection.

Good to see that PPF believe they can get to target funding position by 2030 some 20 years hence. If I proposed a deficit reduction plan with a 20 year timeframe and submitted this to the regulator I can guesss what response I would get. Possibly look again at your plan mate. So why should we accept that the PPF takes 20 years to sort out the problem.

Whilst I am sure everyone thinks that the PPF is a good idea in principle. is the PPF concept not flawed in its execution?

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Why are employers who act responsibly and keep their pension funds in good order expected to subsidise those who dont?

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Maddog

Aug 27, 2010 at 12:56

Because that is the doctrine of the Labour government who introduced the PPF, ie those that can afford to pay (and screw them up in the process) must pay for those who cock up their own position.

Same with taxation, get it from those who work to pay for those who don't want to work or are too idle to work.

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