PPF scheme to act as a buffer against bust employers |
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Wed, 06 Apr 2005 01:00
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Employees can now breathe a sigh of relief, albeit a small one, thanks to a new Government scheme called the Pension Protection Fund (PPF) introduced today. The scheme works as a buffer for employees against their employers who fall into bankruptcy, close down overnight or go bust.
Under this welcome new scheme, the employees’ pensions are protected even if the company folds. In fact the PPF works as a type of 'insurance scheme' which all final salary pension schemes must belong too.
| The Government is quite confident that the new scheme will work in favour of employees in case they are left empty handed in the event of company closure, something sadly lacking in the past when employees have suffered. In addition, the scheme will work as an incentive to workers to put aside contributions into their pension funds, and the Government claims that employers have already increased their contributions to help overcome deficits.
But industry experts think otherwise. They believe the scheme could discourage firms from running final salary pension funds.
The government plan is to build a fund pool of around £300 million a year through the scheme, whereby individual pension schemes will pay for the PPF in the way of fees for each of their members.
This way, the pension rights of the present employees will be 90%, while that of retired workers would be 100%. In the last eight years itself, around 65,000 people have lost 20% or more of their pensions due to closure of the companies for which they worked.
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