PPF to levy £575 million on businesses in the first year |
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Fri, 16 Dec 2005 20:05
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LONDON - The Pensions Protection Fund has said that it will be levying £575 million on businesses in a bid to protect people who lose their savings as a result of the bankruptcy. This figure is well-above the £300 million that the fund had initially proposed.
However, experts believe that the amount is way below the £1.5 billion needed to offer a fair degree of protection to people who suffer due to pension fund failures. Analysts also said that smaller companies are liable to be hit in a big way since the most wealthy companies will pay off the levy and avoid payment in the future should the need arise.
This new announcement comes just weeks after the Turner Commission on pensions reforms suggested that people should work longer in order to make up for the estimated £57 billion shortfall in the pensions'. Commenting on the decision, PPF chairman Lawrence Churchill admitted that they were beginning on a low-key and that the levy could be substantially larger in the next year. He also admitted that the current amount would not be able to stave off all the problems, but was a good first step.
"People are living longer so the deficits have gone up. We have calculated that the cash shortfall in pension funds across the UK amounts to a £100 billion." The scheme was set up to do something about the thousands of workers who are left in the lurch due to collapse of their pension funds.
Churchill said that the payment would be made by pension schemes rather than the employers themselves, so there should be no complaint from that area. "We have had to balance the issues of security for pension scheme members and the costs to the levy payer, which is why we are proposing to collect only £575 million in our first year," he commented. However, no scheme will be levied more than 0.5 percent of its liabilities.
The PPF works by ensuring that, if a pension scheme were to fail; the retirees will receive 100 percent payment, while those who are still working will receive 90 percent payment. "We are reviewing the whole system each year. I do expect businesses to take action from the incentive programme we have announced today. I do expect them to continue to increase lowering the deficits," Churchill concluded.
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