Patrick Jenkins discusses various proposals, including those from the chancellor Jeremy Hunt, to get company pension schemes into the Pension Protection Fund, even where schemes’ sponsoring companies are not bust, with the aim of funnelling money into “start-ups” and other UK investments (Opinion, June 6).
I have a few questions. First, PPF compensation is designed to be less than the full pension promise — members not yet retired are cut back by 10 per cent, and inflation increases for everyone are lower. Overall, people lose around a quarter of their end-toend pension promise.
How would any scheme trustees be persuaded to put their scheme into the PPF when it automatically means lower payments for members? I am chair of a tiny scheme and I can tell you what my answer would be.
Second, there are already mechanisms allowing companies in severe financial difficulty to put their schemes into the PPF, with strict rules to prevent dumping, including the PPF taking an equity stake.
Would rules have to be weakened, and, if so, how could we prevent companies just dumping their inconvenient pensions into the PPF?
Third, the PPF is funded by annual levies on defined benefit schemes, with no government guarantee and, in extremis, member compensation can be cut to balance the PPF’s books.
Will the government now guarantee the PPF, so if things go wrong with the new “plan”, members won’t lose out, and the levy won’t go up?
PPF is the pension success story of the past 20 years — protecting the pension promises of millions. Politicians looking for easy answers — “money down the back of the sofa” — should stay well away, and leave it to do its job.
John Ralfe
John Ralfe Consulting, Kirk Ireton
Derbyshire, UK
