UK - The government has rejected amendments to the Pensions Bill that would allow it to provide financial assistance to the Pension Protection Fund.
Pensions minister Baroness Hollis of Heigham threw out amendments by Baroness Turner of Camden and Lord Oakeshott of Seagrove Bay, adding that the decision not to underwrite the fund in any way was “unambiguous”.
The amendments sought to reverse clause 110, which would make it possible for the government to provide financial support as a safety valve in the event of unexpectedly high claims on the fund.
Oakeshott said: “The government is launching an untried boat – the jolly PPF – on to a stormy sea on a voyage with no time limit through uncharted waters.”
He added: “But everyone in the country knows there will be a government rescue tug if the PPF starts to sink, just as there was when the pressure got too much and the financial assistance scheme was launched at the drop of a hat.
“It seems to us a matter of simple prudence – that ought to commend itself to the chancellor – to plan before setting out what happens if the ship is forced to send an SOS call.”
Turner said: “We do not want the cost of covering past failures to become a deterrent to providing final salary schemes in the future.”
However, Hollis told the Lords: “Should the government stand as a lender of last resort? The government’s view on that is clear. The answer is ‘no’.”She added: “It is a major part of the government’s decision that we will not underwrite this either through making a direct contribution or, as has sometimes been suggested, putting on a levy through the public sector or acting as a lender of monies.”
Hollis said being seen as a guarantor could encourage “moral hazard” – allowing unscrupulous employers to “rely on government hand-outs”.Oakeshott replied that introducing a risk-based levy near the outset would avoid this problem.
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