GOVERNMENT plans for a pensions lifeboat were slammed today, hours ahead of publication of a new pensions Bill.
Pension experts said the proposed Pensions Protection Fund would add to the flood of employers abandoning guaranteed pensions.
Opposition to the PPF is likely to harden further as it emerged that the Government has dropped a key element in the Bill which would have ensured badly-run pension schemes were not cross- subsidised by good ones.
Plans for a risk-based levy – where funds with large deficits pay more than prudently-run funds – have been abandoned, according to Department for Work and Pensions documents.
Instead, funds will initially pay a flat-rate levy and the PPF board will have the freedom to introduce a risk-based levy after a transitional period of perhaps five years.
Employers will be forced to chip in about Pounds 350 million a year to bankroll the PPF, which will protect occupational pension fund members when their employer goes bust. Since 1999 about 200 companies with occupational schemes have folded, leaving 60,000 workers facing shortfalls on pension promises.
The levy will add an estimated 1% to employers’ annual pension costs. Aon Consulting warned that this would be enough to persuade some employers to close down their defined benefit or final=salary schemes.
Aon’s principal Paul McGlone said: “For some companies this will be the final straw.”
